Current trends in corporate governance

Corporate governance is being shaped by several emerging trends as boards navigate complex challenges and shifting expectations. Here are some key trends influencing governance today:

1. Political Influence on the Boardroom.

Politics are increasingly shaping boardroom decisions, particularly around Environmental, Social, and Governance (ESG) issues. While ESG isn't new, the political debate around it has intensified, with differing views between political parties on what constitutes good governance. The recent shift toward conservative politics in the U.S. could challenge existing ESG policies, while other major economies are focusing more on climate change. Corporate boards will need to adapt to evolving regulatory environments, balancing compliance with regulatory bodies like the SEC while meeting the expectations of their stakeholders.

2. Increased Scrutiny of Boards

Boards are facing heightened scrutiny from shareholders, unions, and political activists. Shareholders have become more active in influencing board decisions, with increasing governance and compensation proposals. This trend has led to greater shareholder involvement. To manage this scrutiny, boards should engage closely with shareholders, ensure transparency in decision-making, and align their strategies with shareholder goals beyond profitability.

3. Economic Uncertainty and Shifting Strategies

Economic uncertainty, driven by inflation and rising interest rates, has prompted many boards to adopt more comprehensive enterprise risk management strategies. The possibility of a recession in 2023 led companies to make workforce adjustments, but the situation changed in 2024 when the Federal Reserve reduced interest rates. With the incoming Trump administration in 2025, flow on impacts have been created world-wide. Boards are bracing for regulatory changes tariffs and other geo-political and economic shifts. To navigate these uncertainties, boards must focus on long-term growth, balancing reactive and proactive strategies to safeguard their companies' futures.

4. Increased Oversight of CEOs

Consumer and shareholder skepticism about CEO compensation continues to rise, with many questioning whether CEOs are overcompensated. In response, boards have taken steps to ensure more transparent compensation packages and greater accountability. Many boards have revised compensation structures to align with shareholder expectations. Moving forward, boards will face increased pressure to ensure that CEOs make decisions that maximize returns while also acting ethically, particularly in the context of rising inflation and supply chain challenges.

These trends highlight the growing complexity of corporate governance, requiring boards to remain agile, transparent, and responsive to both internal and external pressures.

Courtesy of Diligent Co. - https://www.diligent.com/en-au/resources/blog/corporate-governance-trends