May 11, 2020

Positive Effects from Publicizing Crisis Response

Even though the market went up last Friday, with unemployment and food lines growing by the day and Covid-19 persisting, it’s clear we’re in a crisis.  If anyone’s ever questioned the importance of a crisis response planning exercise, you might want to give them a copy of a recent study from State Street.  And when crisis strikes, pull the PR team in and make sure the public hears about all the good things the company is doing.

The study shows how a company’s response to the Covid-19 pandemic impacts stock performance and institutional money flow – a good case study of the positive effects of crisis planning and response.  State Street’s website provides this intro:

COVID-19 has forced companies to respond swiftly to the pandemic and highlight their resilience to investors. Exploring how their actions affect stock performance, we found that companies seen as protecting employees and securing their supply chain experienced higher institutional money flows and less negative returns, especially when those practices garnered significant public attention. Firms that most prominently re-purposed their operations to provide in-demand solutions to the crisis experienced a significant positive impact on returns. This evidence challenges the notion that shareholder and employee interests are in conflict. It also suggests that corporate disclosure and media coverage play a significant role in how corporate responses to crisis management decisions could influence investor behavior and impact stock performance.

Cybersecurity: What Investors Want to Know

Speaking of crises, we’ve blogged before about the potential for severe repercussions from a cyber breach – and cybersecurity continues to get significant attention from management and boards. You don’t have to look far to read about another data incident – MGM acknowledged one not too long ago.  Back in February, I blogged about the SEC OCIE Observations and the importance of testing your cyber response plan and according to one pre-Covid-19 study, the vast majority of companies planned to increase cybersecurity budgets for 2020.

Now investors are wanting to know more about cybersecurity too.  A report from SquareWell Partners says that of the 20 largest institutional investors, 14 include cybersecurity as a major discussion topic during engagement with companies.  Besides wanting to discuss cybersecurity with companies, the report says some investors have issued position papers about cybersecurity – and 2 of the 20 largest investors have incorporated cybersecurity into their voting policies – time will tell if more do this.

The report includes a list of questions to help investors understand a company’s policies, oversight and resources related to cybersecurity. The list might serve as a helpful prep tool for companies in the midst of engagement with investors.

Reference for State Reopening Status & Requirements

For those trying to keep track of the ever changing state reopenings and requirements to do so, this chart from Cleary Gottlieb might help.  The chart covers all 50 states plus the District of Columbia and provides an overview of the status of closing orders and reopening plans, as well as any social distancing, sanitation, and occupancy operating requirements imposed on businesses during the closures and reopenings.  Information in the chart is summarized so those relying on the chart are reminded to consult the relevant state orders and guidance for complete details.

– Lynn Jokela