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 UK and Europe, where policymakers and central banks urged cuts, the major banks and many companies followed their guidance. In the U.S., most of the large banks
