Guest blog: What is the future of corporate governance?

Dec 2nd '19

Corporate governance is always a topical subject.


In a rapidly changing world, what should corporate governance look like? What areas should the board focus on? How can they drive their organisation in a direction that’s compliant with regulations and in tune with public priorities?


Simplifie have looked before at the issue of governance, asking earlier this year whether your board should be more proactive when it comes to governance and examining suggestions in the Financial Reporting Council’s annual report that boards need better governance.


Where now for corporate governance?

A report on a recent INSEAD forum, which brought together senior leaders to discuss ‘Boards Renewal for Transformational Governance’, claims that:


‘The sustainability of conventional corporate governance models has recently come into question. Directors are living in the midst of intense competition in a business environment disrupted by shifts in technology, macroeconomics and geopolitics’.


Against this background, how should corporate governance adapt to meet the demands of the future business landscape?


From 1 January 2020, a revised and strengthened UK Stewardship Code will come into effect. The Code aims to make investors more accountable to their clients and beneficiaries; the FCA will require authorised asset managers to report on whether or not they apply the Code.


In an article in Board Agenda earlier this week, the Institute of Directors set out its own Corporate Governance Manifesto, setting out the changes it would like to see made by whichever party wins the upcoming general election.


Its proposals are designed to support three core objectives, to:


  • Increase the accountability of the UK corporate governance system to stakeholders and wider society
  • Improve the competence and professionalism of UK board members – whose role is central to business decision-making
  • Enhance the ability of board members to pursue long-term, sustainable business behaviour – including addressing the challenge of climate change


Are these the three core objectives boards themselves would choose to prioritise? One for debate, perhaps.


The first objective – the question of accountability – is definitely a topical one. A BBC article earlier this week looked at the UK’s ‘particularly extreme form of capitalism’ and referenced a move to greater accountability.


The article said that:


Since 1978, the American Business Roundtable of top chief executives has periodically issued Principles of Corporate Governance. For the last 40 years, all of them have reiterated the orthodoxy that corporations exist principally to serve shareholders. Until now.

In August it issued a new Statement on the Purpose of a Corporation, signed by 181 chief executives who committed to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.’


There seems to be a move towards wider responsibility, not just financially but in terms of creating better workplaces, supply chains and communities.


How can you improve your own corporate governance?

In its article, Board Agenda claims that:


The type, quality, and frequency of information received by the board is central to the board’s ability to fulfil its governance role’.


It’s vital that your board members have the information they need to make decisions grounded in fact and designed to foster good governance.


A key element of this is ensuring your directors get this information in the most usable way. If you can identify how your board members prefer to receive information, you can deliver it in a way that will be read and used.


Briefing your directors effectively for meetings can be more challenging than you might imagine, but is the first, essential step in helping them to make proactive decisions. Avoid jargon and acronyms, and make sure everyone on the board is able to decode the sometimes opaque language of the boardroom.


Technology can help to deliver information to board members in the way they want it and at the time they need it, as well as enhancing other areas of your operations.


We explored this in our blog looking at how you can improve corporate governance with a board portal. Increasing security; delivering best value; keeping a compliant audit trail – these are just some of the ways that taking an online approach to board information can help to deliver stronger approaches to governance.


The steps you need to take to improve governance

Corporate governance – and the landscape in which it is defined and assessed – may be continually changing. But no matter the wider environment, you can take steps to improve your own governance.


If you want to read more about the ways technology and better information sharing can help deliver this proactive governance approach, you can download Board Portal FAQs. The FAQs document is free and available here.


Source: Simplifie


Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.


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