Top 10 Governance And Leadership Trends For 2024
A series of unconventional developments is likely to impact corporate leadership initiatives in 2024. These extend beyond the usual topics such as shareholder activism, cybersecurity, cryptocurrency, and ESG. Rather, they reflect a tier of unique ethical, economic, technological, regulatory, global and political concerns poised to affect corporate leadership in significant and potentially unanticipated ways.
1. Addressing Continued Volatility. Directors must confront the tactical and strategic implications of continued political, social, global, economic and regulatory volatility. This will be driven in part by the prospect of a highly divisive 2024 election process. It may also include concerns with economic growth; international conflict; income, race and gender inequality; continued inflation and continued societal fragmentation. To address these challenges will require directors to exercise heightened attentiveness and closer interaction with management.
2. Recalibrating the Board/Management Dynamic. Directors and executives will need to reconfirm their respective roles and relationships following a year of internal tension prompted by new pressures on directors to become more engaged, and related concerns of executives with board micromanagement. Clarity will be sought on the lines of decision-making, to the extent that distinctions between what is the responsibility of the board, and what is the responsibility of management, have become blurred.
3. Boardroom Culture. An increasing appreciation for the positive contributions of culture to governance effectiveness will motivate boards to confront existing and potential barriers to intra-board collegiality. This may include re-evaluating ground rules for the conduct of board business; activating all board voices in support of constructive discussions; helping the board withstand stress and discord within the context of disagreement; setting clear expectations for director conduct; and helping attract and retain top leadership talent.
4. Board Oversight of AI. External developments will add urgency to board efforts to formalize its role in the company’s acquisition, development and implementation of artificial intelligence. This would include internal structures for board education, monitoring, risk prevention and regulatory compliance. Leadership will also need to confront internal philosophical disputes between the benefits of AI and the speed with which it should be deployed, and the risks of AI and the need to assure that is deployed responsibly.
5. Women in the Workplace. Corporate leaders will be pressured to overcome self-satisfaction with progress made in workforce culture issues for women, given the perceived fragility of those gains. Specific emphasis will be necessary on assuring gender parity for women in middle management, who face limited opportunities for advancement. Leadership will also be challenged to address lingering myths about the state of women at work (e.g., women are less ambitious than men), in order to mitigate lingering barriers to their organizational advancement.
6. The Corporate Social Voice. Increasing political polarization will prompt boards to more closely monitor the extent to which the company (directly and through its CEO) exercises its social voice. Concerns with negative publicity, reputational harm within its consumer base, reaction within the workforce and retribution from influential sources may temper the company’s commitment to corporate social responsibility. They may also increase the risk associated with a CEO’s related public profile. These may especially arise with respect to unusually controversial political, economic, social, cultural and global issues.
7. Codes of Conduct. Leadership will seek to be more closely engaged with its code of conduct as applied to directors, executives and other key corporate representatives. This will involve an examination of the appropriate scope of the code; a heightened appreciation for the code’s role in supporting desired conduct; increased awareness amongst leadership for its breadth and. interpretation; how the code is communicated within leadership ranks; and the fairness and equity with which alleged violations of the code are evaluated and addressed.
8. Board Composition and Refreshment. Notable new data will encourage boards and their nominating committees to adopt a board composition philosophy that is long term in nature, to better assure the availability of core competencies to address challenges into the future. Such efforts may include greater emphasis on critical director qualifications, such as business strategy experience; depersonalized director succession planning; targeted use of age and term limits; discrete application of “offboarding” mechanisms; and “fitness to serve” policies.
9. Corporate Responsibility. Growing, if subtle, organizational fatigue with corporate compliance expectations must be offset by a recognition of the government’s continuing corporate fraud enforcement policies and emphasis on individual accountability. Leadership will be compelled to demonstrate a renewed “tone at the top” that incorporates both government-promoted executive compensation-based compliance incentives, and a consistent message to employees at all levels regarding the corporate priority placed on ethics and honesty.
10. Informed Risk Taking. The growing pursuit by companies of seismic and other “bet-the-ranch” transactions will increase expectations for board oversight of strategic and transactional risk. While informed risk-taking is an accepted corporate leadership practice, recent judicial decisions, regulatory policies and economic implications combine to emphasize the board’s role in assuring responsible transaction risk analysis, especially with respect to collaborations, ventures and innovations that offer extremes in terms of both risk and reward.
Read More