Covid-19 is rewriting the rules of Corporate Governance Since the onset of Covid-19, corporate boards have faced a string of difficult decisions. Take the question of dividend payments: Ordinarily, the decision would be a relatively straightforward matter of applying a stated dividend policy, following past practice, or choosing an amount based on shareholder expectations and the company’s earnings for the period. But this year, with Covid-19 decimating the economy and looming uncertainty about the depth and duration of the crisis, the decision became a complex matter of weighing and balancing multiple factors — at least for companies flush enough to consider it at all. Boardroom dividend discussions ranged over a series of considerations: the equity and symbolism of returning cash to shareholders at a time when employees were being laid off or furloughed; the potential future opportunities gained (or lost) by following (or going against) government calls for dividend cuts; the reputational and signalling effects of maintaining versus suspending or reducing the dividend; the expectations of shareholders and the proportion reliant on dividend income; the company’s cash position and strategic plans; and what would be prudent in the face of extreme uncertainty. A decision that would typically require only a few minutes of board discussion — if that — became an hour-long (or more) deliberation. And then there was the discussion about how to explain the decision in the company’s public communications. In the end, some boards decided to maintain the dividend. Others decided to suspend or reduce it. In the U.K. and Europe, where policy makers and central banks urged cuts, the major banks and many companies followed their guidance. In the U.S., most of the large banks committed to maintaining their dividends, though authorities and experts disagreed about the wisdom of that choice. Whatever the final decision, however, the process of reaching it was far from straightforward. Page 3 of 4 This is just one example of the reality that boards are facing as a result of Covid-19. The new environment is characterized by an increasingly complex set of pressures and demands from various stakeholder groups, heightened expectations for societal engagement and corporate citizenship, and radical uncertainty about the future. These factors are complicating board decision-making and challenging the shareholder-centric model of governance that has guided boards and business leaders for the past several decades. Reference: Paine, Lynn S. "COVID-19 is rewriting the rules of Corporate Governance", Harvard Business Review (October 6, 2020). REQUIRED (a) Define the term ethics and briefly discuss the general ethical issues associated with the above case study. [10 marks] (b) By defining the term Deontology, discuss how the actions of some boards in the above article, to maintain the dividend to their shareholders, relate to this concept. [10 marks] (c) Explain the principle of Consequentialism and analyse how this will impact the relations between the board of directors and other stakeholders in the future. [10 marks] (d) Outline a plan for corporate boards to adopt the Utilitarian approach to ethics in the face of the crisis of Covid-19 by including the definition of this term.