2021 Global and Regional Trends in Corporate Governance
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February 11, 2021
31 min read
Next Generation BoardsLeadershipBoard and CEO AdvisoryLegal, Risk, and ComplianceBoard Director and Chair SearchBoard Effectiveness
Climate change risk, DE&I, sustainability reporting standards and human capital management will be the top global and regional trends in corporate governance, according to our new survey.
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Board and CEO Advisory Partners

2021 Global and Regional Trends in Corporate Governance

 



Introduction

This year, as in the previous five years, Russell Reynolds Associates interviewed over 40 global institutional and activist investors, pension fund managers, proxy advisors and other corporate governance professionals to identify the corporate governance trends that will impact boards and directors in 2021.

At the time of publishing last year’s paper in January 2020, we could not have known just how painfully relevant many of the trends we predicted would turn out to be:

GLOBAL TRENDS PREDICTED FOR 2020

  1.  Greater focus on the E&S of ESG
  1. Increasing importance of corporate purpose
  1. Better board oversight of corporate culture and HCM 
  1. More expansive view of board diversity that includes ethnicity and race
  1. Companies facing wider forms of activism

The COVID-19 pandemic and social justice movements have had far-reaching impacts on business and society around the world. In many ways, we are at a turning point. Corporate governance trends vary somewhat across regions, but corporations globally are experiencing a reckoning around their role in society. The expectations of the independent directors who oversee corporations have never been higher.

GLOBAL TRENDS PREDICTED FOR 2021

  1. Climate Change Risk
  1. Diversity, Equity & Inclusion (DE&I)
  1. Convergence of Sustainability Reporting Standards 
  1. Human Capital Management
  1. Return of Activism & Increased Capital Markets Activity
  1. Virtual Board & Shareholder Meetings: Here to Stay

 

1. Climate Change Risk: The pandemic forced the “S” of ESG (environmental, social and governance factors) higher up the corporate agenda as companies sought to reassure stakeholders that they took the safety of their workers and communities seriously. In 2021, climate change will be back in focus.

Corporate responsibility for managing climate change as a long-term, material financial risk has gained traction in markets that have previously resisted it. That the Biden administration in the US rejoined the Paris Climate Agreement on its first day in office reinforced that. Commitments to carbon net zero by 2050 are widespread and creating pressure on peers (both companies and governments). In his 2021 letter to CEOs, BlackRock’s Larry Fink set expectations for companies to disclose how their business plans incorporate net zero by 2050 and how these plans are reviewed by the board.1 Boards should also pay cl