What Could Be On The Horizon This Year For Corporate Governance
The way in which companies and organizations are governed continues to evolve with the times. Here’s what may be in store for business leaders and boards of directors in terms of governing-related policies, procedures, practices, and priorities in the next 12 months, according to CEOs, analysts and other observers.
More Accountability
“Shareholders are going to hold boards more accountable. There will be wholesale changes at many big companies whose boards and management fail to deliver and do not act,” Daniel Strachman, co-founder of the Investment Management Due Diligence Association and managing partner of A&C Advisors, said via email.
“The recent news in late 2022 about the CEO of Disney is causing many shareholders to question the board of director’s actions or lack of action,”
Greater Board Engagement
“Shareholders will demand boards that are more engaged with companies,” he commented. “Moreover, they will call out board of director members who sit on too many boards and simply show up at meetings and collect a check. The weakened economy will continue to keep [the] board of directors in check and accountable to help lead,” he said.
More Emphasis On Board Diversity
There will be a “greater emphasis on board diversity,” Dvir Ben Aroya, cofounder and CEO of email platform Spike, said via email. “There has been a growing recognition of the importance of diversity in the boardroom, and companies are increasingly being encouraged to have boards that reflect the diversity of their stakeholders and the communities in which they operate. This trend is likely to continue in the coming years.”
Increased Shareholder Activism
“Shareholder activism has been on the rise in recent years, and we expect to see this trend continue in 2023,” Shri Ganeshram, founder and CEO of Awning, a platform that helps individuals buy and own rental properties, said via email.
“Investors are increasingly using their voting rights to influence corporate governance and push for changes that they believe will benefit shareholders,” he speculated.
Sustainability A Priority
“The volume of [new] sustainability-focused regulations will significantly increase in 2023 and create new drivers for enterprises to push change throughout their organization,” Adam Moloney chief financial officer of software company Blancco Technology Group, said via email
“The initial impact of these regulatory changes will result in companies making more of a cross-functional effort to understand what needs to happen internally to meet the moment. We will see enterprises staffing up on sustainability roles, from coordinators to C-level executives,” he predicted.
Updated Guidelines And Regulations
“Regulators and standard-setting bodies around the world are continuously updating their guidelines and regulations related to corporate governance. Companies will need to stay abreast of these changes and ensure that they are in compliance with the latest requirements,”
ESG On Back Burner
“This governance issue will continue to be included in governance discussions but will see little if any, real action. As the economy continues to weaken, companies will be focusing on profits and stability rather than focusing on ESG issues,” Strachman of A&C Advisors said.
Impact Of Technology
“Technology is already having a big impact on corporate governance, and we expect to see this trend continue in 2023,” Awning’s Ganeshram thought.
“Companies will likely use technology to improve communication and transparency with shareholders and other stakeholders, as well as to streamline governance processes and reduce the risk of errors,” he concluded.
More To Come?
Each new year holds the potential for more governance-related rules and regulations and there’s no telling what other issues may suddenly emerge in 2023.
“It is always a good idea for companies to stay informed about the latest developments in the field and to continuously assess and improve their corporate governance practices,” Spike’s Aroya advised.
By Edward Segal, 2nd January 2023
What Could Be On The Horizon This Year For Corporate Governance (forbes.com)