Top corporate governance trends for 2024 & beyond
In the 1970s, lawmakers and the then 40-year-old Securities & Exchange Commission sought to prevent economic unrest by holding companies and their directors accountable. This groundbreaking accountability tool? Corporate governance.
While many corporate governance trends have come and gone since then, what remains is a desire among regulators and shareholders alike to see corporate boards operate transparently and ethically. Crises like the COVID-19 pandemic have only magnified calls for boards to further define — and remain accountable to — good governance practices.
How will corporate governance continue to evolve in 2024 and beyond? Consider these top corporate governance trends in the U.S. and worldwide so you can create a governance framework that will keep up.
Current trends in corporate governance
Trend 1: Politics are influencing the boardroom
Many people view The United Nations’ 2004 Who Cares Wins report as the document that made environmental, social and governance (ESG) mainstream. So, while ESG isn’t a new corporate governance trend, how it’s politicizing the boardroom is.
Politicians on both sides of the aisle have different opinions on ESG and, as a result, different ideas about what constitutes good governance. House Republicans, for example, believe ESG detracts from more pressing issues facing shareholders, while House Democrats say it’s important for shareholders to be informed about all possible risks.
Modern boards will likely have to chart their paths forward individually, toeing the line between complying with the SEC and other regulatory bodies while also meeting the expectations of their unique shareholders and customers.
Trend 2: Boards are facing increased scrutiny from all sides
As ESG pressure intensifies and the SEC’s universal proxy rules become the new norm, boards will continue to face questions from shareholders and customers alike.
The universal proxy has empowered shareholders to exert their point of view, even if it’s through a proxy fight. However, corporations can use the new rules to more closely align with their shareholders' expectations. Consider why shareholders invest in your company and their goals beyond profitability, then offer transparency around board decision-making in those areas.
Trend 3: Sustainability goals — and results — remain critical
Stakeholders want to see a continued commitment to sustainability. But this ESG focus isn’t just a matter of reputation. The SEC expects to adopt its Climate Disclosure Rule in 2024, a framework that is either welcomed or stress-inducing, depending on who you ask.
While that rule will likely transform the sustainability reporting landscape, waiting for it to pass may ultimately put your organization behind the curve. Stakeholders want to see a genuine and proactive commitment to climate impact. Whether your ESG program is lacking or thriving, start adding ESG oversight so you can thoughtfully and transparently explain your climate impact.
Trend 4: Economic uncertainty changing company strategies
At the end of 2022, economists and corporations feared the following year would bring a recession. Rising interest rates and inflation only added to the pressure for boards to perform despite growing uncertainty.
Many companies prepared throughout 2023 by laying off employees, attempting to retain valuable workers and offsetting the fluctuating workloads with contractors. While the Fed has announced that a recession may not occur at all, boards will have tough decisions to make as economic instability continues. Many corporations have adopted more comprehensive enterprise risk management strategies, but it’s also important to be proactive rather than reactive. Consider how your decisions will foster — or inhibit — long-term growth and strive to act in the best interest of your company’s future.
Trend 5: Stakeholders want greater CEO oversight
Consumer skepticism around CEO compensation isn’t new. Many consumers and even many shareholders believe CEOs are over-compensated. More transparent compensation packages can push back against this scrutiny, but CEOs will likely remain in the spotlight.
Shareholders want to see that CEOs are performing, specifically that they’re making what shareholders see as the “right” decision to maximize returns. At the same time, rising inflation and supply chain issues have renewed the call for corporations and their CEOs to act ethically and responsibly.
Emerging trends in corporate governance
Trend 1: Artificial intelligence will present new challenges
Technology is already omnipresent in many boardrooms. Many boards utilize tools like board portals to streamline collaboration and foster security and transparency. Artificial intelligence (AI) will likely revolutionize board activities inside and outside the boardroom.
This transformation can not only introduce new and potentially unprecedented security risks but may also transform how corporations do business. Companies may use AI to generate images, train language learning models like GPT-4 to fulfill a specific task, create videos and more. It’s critical that boards and executives proactively consider the potential applications of AI, the risks it will represent and the new governance practices it will require.
The recent conflict between the OpenAI board and the company’s CEO proves that even AI nativists disagree on how to approach it. Corporations should speak often about AI as it evolves to take strategic and unified steps forward.
Trend 2: Ethics will be a key focus
New technology may introduce new ethical issues. AI, for example, isn’t easily transparent and has biases, which can complicate data-gathering and decision-making for boards striving to offer their shareholders greater visibility.
At a time when shareholders are already concerned with boardroom practices, new technology will only intensify the ethical issues boards face. Boards must proactively handle the ethical concerns arising from technology, including how they plan to overcome the implicit biases of many software solutions.
Trend 3: Boards need more effective systems for sharing data
Boards have an incredible amount of responsibilities, all requiring complete oversight of business activities. Yet, in many cases, outdated reporting structures make it difficult for boards to access the information they need to make key decisions.
As technology evolves, ESG pressures rise, and cybersecurity threatens performance, boards will look for ways to streamline and centralize reporting. Boards that don’t have an effective way to collect and review key information may lose their competitive edge — or even fail to comply with disclosure rules from the SEC and the EU.
Trend 4: Corporations need to nurture and attract young talent
The workplace will transform over the coming years. Businesses that rapidly cut their workforces or implemented hiring freezes in 2023 may later face a lack of talent. Additionally, board and C-suite succession may become challenging as experienced board directors near retirement without younger talent to replace them.
Companies should start nurturing young talent now by considering the diverse skillsets and backgrounds that could set the company up for future success. Legal, cybersecurity, financial and data/analytics are skills most boards will need to cultivate to succeed.
Trend 5: All eyes are on board evaluations
Board effectiveness remains a focus for investors and consumers. They want to see board directors and company executives not only fulfill their fiduciary duties but act with integrity. That means boosting financial performance and considering the broader impact of corporate activities.
As a result, boards need to prove that they’re completing regular and comprehensive evaluations that consider all facets of board governance: composition, diversity, risk management and more.
Global trends in corporate governance
Trend 1: ESG reporting will remain a high-priority in the European Union
Organizations operating in the EU are already preparing for increased sustainability reporting. 2024 will bring the first wave of adoption for the Corporate Sustainability Reporting Directive (CSRD), with total adoption planned for 2026.
As companies adapt to CSRD and continue the conversation around the European Sustainability Reporting Standards, boards have the opportunity to become leaders in sustainability. The most successful boards will be those who actively participate in and shape this process and contribute to a more effective reporting climate both within their business and across the EU.
Trend 2: Asia-based activism is on the rise
Shareholder activism has been a hot topic in Asia, just as it has in the U.S. Asian-based shareholder activists are pushing back against Asian-based companies, largely because they perceive those companies as undervalued.
ESG has only renewed this enthusiasm for activism, as has a demand among Asian shareholders to see more value in their investments. In Japan, for example, many shareholders have called for corporations to return cash.
Trend 3: Corporations in LATAM can reassure investors by filling legal gaps
In Latin America, regulators have been slow to implement legal reforms that protect investors. This has left many shareholders understandably hesitant to invest in corporations with even a modest amount of risk.
These gaps in the LATAM legal system are actually an opportunity for corporations. Boards can use corporate governance practices to offer shareholders the assurances they need. Greater transparency will not only benefit your reputation within LATAM but will also signal a commitment to stricter disclosure benchmarks like those in the U.S., EU and other global markets.
Trend 4: The Israel-Palestine War will challenge boards ideologically and economically
Tragedy runs deep on both sides of the crisis in Israel and Palestine. Boards may have to navigate ideological divides, either between directors in the same room or between the interests of the company and the interests of its customers. This may bring challenging conversations to proxy season 2024, but it’s also an opportunity for boards to listen and compassionately respond to those their company serves.
At the same time, the war could exacerbate economic hardships like high inflation and oil prices, impacting countries in the region and worldwide. This, too, could trickle down to the strategic direction of many corporations.
Historical trends
| Year | Trend 1 | Trend 2 | Trend 3 |
|---|---|---|---|
| 2023 | The universal proxy challenges boards to align with shareholders | AI begins to transform the business landscape | Rolling layoffs and hiring freezes impact availability of talent |
| 2022 | Increased standards for sustainability reporting | Rising gender diversity on corporate boards | Greater emphasis on board effectiveness |
| 2021 | Focus on environmental and social issues | Importance of corporate social impact | Board oversight of company culture |
| 2020 | Expansion of remote working | Ethnic and racial diversity on boards | Scrutiny around executive compensation |
| 2019 | Push for greater board quality and performance | Using governance as a tool to add value for investors | ESG took center stage for boards and investors |
| 2018 | Expectation for investors to influence corporate strategy | Increasing engagement with activist investors | Continued focus on board composition |
| 2017 | Push for more uniform governance practices | Holding boards accountable to long-term performance | Expecting the board to oversee a wider range of business activities |
| 2016 | Investor skepticism about individual board directors | Increased governance regulations to boost transparency | Surging shareholder engagement around ESG issues |
Future-proof your corporate governance framework
Corporate governance changes quickly. While it’s important to understand the top trends in corporate governance, it’s equally important to implement a governance framework that will evolve as the business landscape does — not fall behind.
Bringing your governance to maturity means enabling secure collaboration, seamless data sharing, and real-time oversight into key issues ranging from ESG to cybersecurity and issues we have yet to face.
Download our free checklist to learn how to turn the top corporate governance trends into opportunities to cement your competitive edge.
