How Is Corporate Governance Preparing for the Future?

2018 has been a rather hectic year for Corporate Governance professionals. Issues ranging from board diversification to executive pay as well as increasing stakeholder interest in social and environmental issues etc. has kept everyone on their toes. Whilst it is indeed a good sign that stakeholders are demanding companies to be more socially responsible, there are some serious emerging risks as well. These range from ever-evolving cyber threats to regulatory and environmental concerns. How can you therefore prepare your organisation for the future?

Selecting the right board

The first step towards good governance is selecting the right board. Investors and other stakeholders are increasingly looking for more experience, diversity, initiative and commitment from board members. The focus is shifting more towards stewardship and accountability

Executive pay and fair remuneration

Compensation is another hot topic with executive pay under the spotlight across the world. Stakeholders are ever more conscious of how incentive schemes are structured and performance rewarded. Pursuing fair remuneration should not stop just at the executive level either. Ensuring that staff members at all levels are fairly compensated is key to minimising the risk of internal fraud or breaches,

Employees aligned with vision and goals

The employee feedback loop continues to be the most fundamental way for management to take the pulse of the organisation. It is important to encourage employees to speak up when they see something that is off and report it to the right authorities without fear of retaliation. In addition to encouraging whistle blowing, periodic surveys to assess the mood of the organisation might also help. It can be enormously beneficial if employees are aligned with the vision and goals of the organisation.

Diversity and Inclusion

It is the responsibility of management to ensure Diversity and Inclusion (D&I) at all levels of the hierarchy. Surveys have shown that D&I can increase productivity as well as employee morale. Additionally, a more diversified workforce is generally more creative and likely to spot hidden trends.

Cyber security

Although good governance means managing all risks, special emphasis must now be placed on cyber risks. Rather than treating it as the responsibility of the IT department, each individual should be made aware of the potential risks and know how to mitigate them. This is not only a technical subject, but also requires redefining roles and responsibilities, authority levels and backup plans.

Stakeholder management

With an increasing consciousness around environmental and social issues, the focus is steadily shifting from shareholder management to stakeholder management. Businesses are corporate citizens and as such they must ensure they are having a net positive impact on everyone around them. It is not only about managing reputational risks, but moreover ensuring business is conducted responsibly for the sake of our planet.

Conclusion

The era of only looking at the numbers is long over. Consumers are becoming ever more conscious about how much they consume and their own carbon footprint as well as the social impact. This translates to greater corporate scrutiny and the new Corporate Governance paradigm must take all of this into consideration. The companies that are likely to be customer favourites in the coming years will likely be the ones which lead in terms of ethics, governance and responsibility, in addition to delivering the numbers.

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24-08-2018

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