On January 30, 2020, the severe acute respiratory syndrome coronavirus 2 (SARS CoV2) that causes coronavirus disease 2019 (COVID-19) was identified by the World Health Organization (WHO) as constituting a Public Health Emergency of International Concern (PHEIC). With little information on how to diagnose, treat, and safeguard people against the disease, countries around the world responded to the outbreak differently depending on the national context.
While it was a health crisis, it soon transformed into an economic crisis affecting key corporates involved in the production, logistics, and supply and more seriously to airlines whose services were badly hit by the measures put in place to curb the spread of COVID-19. Some of the questions that still demand answers are those pointing to the implication of COVID-19 on the key issues of corporate governance, particularly good corporate governance and corporate crisis management strategy.
Crises and their implications on the socio-political and economic well-being of societies have long attracted the attention of scholars and social analysts as “throughout history major crises have provided turning points in social and political organization, altering economic fundamentals, reshuffling alliances, shifting narratives and reconfiguring public authorities”. Political economists, for instance, have raised the question of “whether these economic crises are always followed by political crises” claiming that in the past years, “there has been much debate about the place of crises, and crisis narratives, in restructuring public policies”.
There are also essential questions and reflections to be raised about the implications of COVID-19, though it began as a health crisis, it soon transformed into an economic and political crisis in many regards. Similarly, examining the implications of COVID-19 on corporate governance is equally important, since COVID-19 proved to be challenging beyond expectations not only for the poorer and developing nations but also the rich and advanced nations.
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Globally, the pandemic revealed the limits of many if not all countries and corporates to respond and manage crises of this nature. While the best approach would have been to work together and come up with the most appropriate means of curbing a challenge of such magnitude, most of the approaches taken were nation-specific, and corporate-specific and were largely confined to within national borders. The consequences of such an approach would likely be varied and would raise the need for diverse exit strategies.
The pandemic led to the link between the scientific communities and practitioners being questioned, and all were compelled to come up with a way of working together. The pandemic further revealed the limits of governmental reliance on experts, as well as the implications of a political desire to influence their findings. Similarly, it proved that, although institutional arrangements and rule-based decision-making are of greater importance, still, in times of emergencies like the COVID-19 crisis, a complex institutional infrastructure that abides by rules and procedures may have some limitations, as was evidenced by the way the EU dealt with the pandemic.
The EU’s weaknesses were largely internal and structural and emanated from what Christensen and Lægreid (2020) and Lodge and Wegrich (2014) refer to as a “lack of governance capacity” or “limited governance capacity”, which hindered the efforts to manage the crisis effectively. It was only when it diverted from its strict adherence to the rules and principles, such as the financial regulations, that it was able to deliver in terms of funding to back up the worst-hit economic sectors.
One of the areas that COVID-19 challenged not only countries but also corporates was supply-chain. The COVID-19 outbreak spurred a massive spike in global demand for personal protective equipment (PPE), especially for the most vulnerable groups, such as the medical workers on the frontline of the fight against the pandemic. For instance, it is argued that most of the EU countries were taken by surprise, being unprepared to meet even their domestic supply, let alone contribute to the global chain supply. Worse still, even the most basic medicines used in the treatment of COVID-19 were obtainable within the region.
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France was the only country with factories capable of manufacturing facemasks, although its production capacity could not match with the demand, with a capacity of 170 million facemasks a year compared to the 200 million a day achieved by China. The EU was thus unable to contribute to meeting the global demand (ADB 2020). As noted in one study, “The Belgian federal government has traditionally held stocks of personal protective equipment (PPE) … when COVID-19 hit Belgium, this meant health services quickly ran low on stocks of PPE, leaving the government scrambling to find suppliers on the international markets” (Overbeke and Stadig (2020, 311). The dependence on the international market was evidence of just how unprepared European industry and its factories were. It was China whose factories were able to step up to meet the global demand for PPE with an estimated value of US$2.5 billion in 2018 (ADB 2020).
Given that COVID-19 has proved challenging to corporates and that some of its most successful solutions meant bending principles of good governance. In your views and drawing from the above case, propose a model and appropriate crisis management strategy corporates need to put in place to solve a crisis without resorting to weakening principles of corporate good governance if a similar crisis is likely to outbreak in the future.
Taking Tanzania as an example, and with the aid of examples from various corporations, the COVID-19 crisis has implications for corporate governance and its reforms in Tanzanian corporations.
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