A recent discussion on the future of corporate governance has thrown up some interesting facts. With the emergence of the new model of corporate governance, companies are now required to serve a social purpose, and not just specify their sense of purpose. The recent strengthening of the corporate governance code provision by the Hong Kong Executive search, which has come into force from 1st January 2019 highlighted the need for fortifying the transparency and improving the accountability of boards, encourage diversity, and raise the criteria to assess and appoint iNED's.
Key Insights from the Discussion
Increased Pressure on Independent Non-Executive Directors
The panel was unanimous about the existence of a lot of responsibilities on the iNEDs, and that the new regulations are only causing their role to become harder.
Strategy Remains an Important Part ofthe Boards
Boards are required to earmark enough time to exhaustively scrutinise the strategic direction of the company as an important component of corporate governance standards.
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Cybersecurity and Digital Capabilities
Cyber challenges remain as one of the top agenda items that the board has to confront. Hence, it is important for board members to know the potential business impact. This is not only an area for board members to develop, but it is possible to bring in fresh talent for filling the vacancy of digital capabilities of the board.
The Importance of Diversity in Business
Women and diverse talent have a role in bringing in changes in the corporate culture, introducing new perspectives and prevent groupthink, while challenging the status quo.
Level Playing Field for Both Men and Women to Reach the Board
Managing female talent pipeline is an important way to see more women at the senior management as well as at board levels. The UK has achieved this to a greater extent with 28% of board members now represented by women. However, there is a need for a level playing field with regards to promotions and see to it that only the best talent can reach the senior positions without any gender bias.
Reporting on Environmental, Social and Governance (ESG)
It was highlighted that ESG commitments are considerably influenced by the outlook of a company, and many of these commitments are more concerned about the short-term measures causing harm to long term. In addition, the quarterly reporting could potentially blind companies about their long term results.
The need for Purpose in Business
The discussion panel asked businesses to show more accountability to society and also to other stakeholders. Making a strategy that is purpose-driven is important in corporate governance standards. With the alignment of a team around a common goal gives both business representatives and employees a greater sense of ownership of the various actions taken.
Importance of Flexibility of Board Director
It is important for the board director to have the flexibility of thought with regards to new ideas, balance, courage, judgement, and curiosity.
