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Companies have to evolve and adapt to the changing business environment. In a world shaped by digital disruption and tightening regulation on sustainability disclosures, board leaders would do well to understand the emerging trends in corporate governance to get their balancing act right.


The thing about corporate governance is that it is hardly static. Just like business, the landscape constantly evolves to meet changing demands and societal expectations.

Effective boards understand this dynamic: they appreciate what trends are at the forefront. This gives them the ability to navigate as well as adapt their practices effectively, so as not to be caught off-guard when these trends reshape the operating environment.

Russell Reynolds Associates’ Global Governance Trends 2023 reveals three key trends:

1. Scepticism about board quality.
2. CEOs in the crosshairs.
3. Maturation of ESG programmes and disclosures.

Trend #1: Scepticism About Board Quality

With more savvy and empowered stakeholders paying close attention to many aspects of board performance, boards everywhere will experience further scrutiny of their quality, effectiveness and composition. Merely meeting the formal requirements may not be enough to earn credit and trust from stakeholders. Regulators will also introduce more formal requirements to raise the bar.

The US, for example, is entering a new universal proxy era that will invite a more assertive approach by shareholders on director qualifications and disclosure. These heightened demands for proof of board effectiveness will add momentum to existing efforts to make board evaluation processes more rigorous.

In Europe, companies continue to face demand for upgrades to board skills and structure – such as the requirement for listed German companies to have two financial experts on their boards, as well as the explicit code recommendation for the skills profile to include sustainability expertise relevant to the enterprise.

In Singapore, since the 2018 revision to its Code of Corporate Governance, the limit of nine years for independent directors was tightened by requiring a two-tier shareholder votes to reappoint long-serving independent directors in the Singapore Exchange’s listing rules. When this was not working well, the two-tier shareholder vote was removed and nine years became a firm limit.

Regulators and investors will continue to seek more deliberate board effectiveness activities, particularly related to board refreshment and succession planning. C-suite experience is highly desired, but investors will care more about understanding the link between board skills and long-term strategy.

As a result, more companies will formalise their board search procedures via new nomination committees or enhancements to the people committee, ensuring diversity is part of the process. The box, “Highly Effective Boards”, explores a common set of behaviours that drives effectiveness.

Trend #2: CEOs in the Crosshairs

The current global economic distress and turbulent markets are affecting the governance landscape. Everything from the war in Ukraine, post-Covid supply chains and rising inflation have put strain and stress on companies and their leadership, and experts expect an even greater emphasis on board oversight of CEO performance and succession planning across geographies.

Given the focus on CEO performance, it is unsurprising that there have been even greater attention on, and scepticism of, executive compensation. The perception is that boards have been too generous with CEOs – and too willing to explain away missed incentive compensation targets.

Looking ahead, companies should not expect the same benefit of the doubt that some investors were willing to give through the worst days of the pandemic. Investors will expect executives to share the pain they feel as investment returns diminish. Outsized pay-outs will likely generate meaningful scrutiny, more engagement requests, lower say-on-pay support and votes against director nominees.

In Singapore, disclosures of CEO and director remuneration will be mandatory for listed boards’ annual reports for fiscal years ending on or after 31 December 2024. Besides disclosing the policy and criteria for setting remuneration, companies will also be required to provide the amounts and breakdown of the remuneration of each director and the CEO on a named basis.

The harsher spotlight on executive performance and compensation is due to the rise of CEOs as public figures and their growing list of corporate responsibilities. Increasingly, there is an expectation that the CEO takes on the role of a visionary leader and the public face of the organisation. The age of the celebrity CEO (think Bill Gates, Jeff Bezos and Elon Musk) with big visions and big personalities is now upon us.

Today’s CEOs are accountable for more, and they control less than ever before. For example, they must deliver outstanding business results in the face of unprecedented external forces, and they must show progress toward sustainability despite often inheriting unsustainable business processes. The box, “The Imperfect CEO” addresses some of these conflicting dilemmas.

Trend #3: Maturation of ESG Programmes and Disclosures

Despite evidence of some pushback against the environmental, social and governance (ESG) agenda, global investors are doubling down on demands for enhanced sustainability reporting and environmental responsibility activities. Most notably, the Corporate Sustainability Reporting Directive will disrupt the ESG landscape across the EU by harmonising standards and shaping the reporting environment for years to come.

The aperture on ESG issues continues to broaden as a growing number of stakeholders demand sustainability and corporate social responsibility assurances. Activism is set to increase as social and geopolitical uncertainty continue to rise, coupled with inflationary pressures across the globe. The narrative of some activist investors is increasingly convergent with the broader ESG movement, and they are holding boards and executives accountable by publishing metrics and progress.

While specific expectations vary, institutional investors expect all boards to have thoughtful oversight processes for material ESG risks and opportunities, and boards should expect regular ESG engagement from their investors. These institutional investors are increasingly asking for the full board to be educated and conversant on ESG at a high level, with priority placed on ESG expertise for material issues. Investors will be most focused on structured board oversight, transparency of reporting, progress on material ESG issues, and specific sustainability-related topics, such as carbon reduction.

As companies increasingly rely on digital infrastructure, boards are confronting existential issues concerning their data governance, privacy and cyber security practices. The increasing prevalence of cybersecurity incidents, including those targeting large public companies, continues to spotlight the need for boards to effectively oversee cybersecurity issues and take steps to sufficiently educate directors on the subject matter.

In recent years, investors have been clear that sustainability and climate risk are the board’s responsibility. Rather than having a sole ESG director or sustainability director, expectations are increasing for the entire board to bring a minimum level of sustainability awareness, if not expertise, to their work, using it to identify both risks and new opportunities for value creation. The box, “From Insights to Action”, show the responses of 1,000 companies to the expertise on the board for sustainability.

This article is first published in the SID Directors Bulletin 2023 Q4.
It was published by Rusell Reynolds Associates here.

Photo by Loic Leray on Unsplash.

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