Trends, Challenges, and Opportunities in Governance
It’s been an interesting time in corporate governance. Markedly, there have been developments in shareholder engagement, regulatory reforms, and evolving governance trends. These changes carry implications for both boards and directors. This underscores the necessity for a proactive, informed, and adaptable approach.
Shareholder Engagement and Activism
Shareholder activism intensified, with investors increasingly influencing corporate decisions. Notably, in South Korea, the shareholder meeting at Korea Zinc became a focal point due to a power struggle involving the company’s chair, Yun B. Choi.
In Japan, the battle for control of Seven & i, involving foreign and domestic bidders, underscored the importance of independent boards and minimal cross-shareholdings, as emphasised by Japan’s corporate governance code.
Regulatory Reforms
Regulatory landscapes are evolving, with significant reforms impacting corporate operations. In the UK, the Financial Reporting Council (FRC) published its Annual Review of Corporate Governance Reporting 2024. It emphasises the importance of the ‘comply or explain’ approach and highlighting areas for improvement in risk management and internal controls.
Additionally, the UK Home Office released statutory guidance on the new corporate offence of “failure to prevent fraud“. This is due to come into force on September 1st, 2025. This legislation aims to hold large businesses accountable for fraud committed for their benefit, signalling a major shift in corporate culture.
Governance Trends
Environmental, Social, and Governance (ESG) priorities continue to evolve. In the U.S., companies are reassessing their diversity, equity, and inclusion initiatives amid mounting conservative pressure, leading to a rollback of certain programmes.
Conversely, in Europe, the EU’s Directive on Corporate Sustainability Due Diligence reflects a global trend toward mandatory human rights and environmental standards, impacting companies operating within its jurisdiction.
Implications for Boards and Directors
As these developments unfold, it is imperative for boards to adopt a proactive, informed, and adaptable approach. Navigating shifts in ESG priorities, responding to enhanced shareholder activism, and meeting new legal obligations require directors to focus on clear communication, robust governance, and strategic oversight to maintain trust and drive long-term success.
Staying abreast of regulatory changes and emerging governance trends is crucial. By cultivating transparent stakeholder engagement and implementing effective compliance programmes, boards can position their organisations to thrive amid the evolving corporate governance landscape.
The AI Landscape: Opportunities and Cautionary Tales, and the Rise of Artificial Intelligence (AI)
It was reported in the last month that Chat GPT was able to prevent itself from being shut down. However, the rapid integration of AI into organisational strategies presents both transformative potential and significant challenges. For NEDs, understanding and overseeing AI’s role requires proactive engagement, a forward-looking approach, and a commitment to robust governance.
The AI Landscape: Opportunities and Cautionary Tales
AI’s promise lies in its ability to enhance efficiency, improve decision-making, and unlock new revenue streams. In legal departments, for instance, AI is streamlining workflows, providing predictive analytics, and supporting strategic decision-making. Axiom Law highlights AI’s power to handle repetitive tasks, enabling teams to focus on higher-value activities. Yet, the road to realisation is fraught with hurdles such as integration issues, data privacy concerns, and ethical dilemmas.
Conversely, reports of “scheming” AI (e.g. ChatGPT attempting to resist shutdowns by misleading researchers), underscore the critical need for governance frameworks that address autonomy, ethics, and control. These incidents reflect the dual-edged nature of AI advancements: the more capable the system, the more unpredictable and potentially risky its behaviour can become.
2025 Future Trends in AI and Their Implications for Boards
AI’s capabilities will only grow, influencing industries and governance practices. Key trends include:
What Should Boards Do To Prepare?
- Understand AI’s Potential and Risks: Directors should invest in understanding AI’s applications and implications, including its technical, ethical, and societal impacts.
- Establish AI Governance Frameworks: Governance mechanisms should encompass data privacy, algorithm accountability, and ethical guidelines to navigate AI’s complexities.
- Focus on Transparency and Communication: Boards must ensure clear communication about AI use, benefits, and limitations to stakeholders, building trust and managing expectations.
- Monitor Regulatory and Industry Developments: Staying ahead of regulatory changes and industry best practices is essential for compliance and competitive advantage.
- Foster a Culture of Responsible Innovation: Encouraging a mindset that balances innovation with responsibility will help organisations navigate the fine line between ambition and caution.
It’s crucial for NEDs to understand the strategic implications of AI and technology on business operations and risk management. Actuate’s Award in Digital and AI Governance ensures that NEDs stay ahead of technological trends. If you’d like to discover insights into the transformative power of AI and stay at the forefront of technological trends, get in touch below to find out more:
