Corporate Governance Trends 2018

Seven Key Global Trends in Governance of Which Directors Should Be Aware

- Rusty O'Kelley III

At the end of each year, Russell Reynolds Associates interviews over 30 institutional and activist investors, pension fund managers, public company directors, proxy advisors, and other corporate governance professionals in key markets regarding the trends and challenges that public company boards will face in the following year.

Across all of our interviews this year, an overriding theme was the importance of board quality and composition —and the components that go into both. Investors of all types (including institutional and activist) are continuing to ratchet up their focus on the quality of a company’s board of directors, both collectively and individually.

The focus on quality and composition is even greater than in previous years. Investors are motivated to hold boards accountable for company performance and are willing to take action to ensure that boards are meeting governance standards. Governance expectations continue to rise across markets and industries. Investors and proxy advisors are relying on traditional metrics (for instance, tenure, overboarding to assess board quality) but a number of investors have talked about needing to have greater insights into the board to assess quality.

Based on the events that have unfolded in 2017, it is likely that the world’s largest investors also will pay closer attention to cybersecurity, climate change risk, and corporate culture in 2018. This may require boards to revisit their approaches to risk oversight, including broadening their perspectives on what constitutes risk management and is therefore within the scope of a board’s oversight responsibilities.

SEVEN GLOBAL TRENDS

Based on our interviews and research, we see seven key global trends in governance of which directors should be aware.

1. Better investor stewardship: