In an era of fast-paced growth and global expansion, boards of directors and CEOs are expected to steer complex operations and guide sector-diverse entities towards success. To support the leadership of global conglomerates with their increasing responsibilities, organisations commonly create an executive governance layer that resides just below the CEO. This executive governance model is composed of powerful governance bodies and decision-making forums that turn strategic oversight into decisive action, harnessing an optimal combination of cross-functional and specialist expertise. It also encompasses the mechanisms through which these bodies exercise authority and ensures accountability for defining and delivering against business objectives, while upholding ethical standards and fulfilling fiduciary duties.
The structure and governance of the executive management layer can significantly influence a business's progress, either driving it forward or hindering its growth. The effectiveness of executive governance bodies depends on factors, such as the clarity of their remits and the level of empowerment they are granted. This white paper examines the challenges of executive governance and presents leading practices and solutions to address them effectively.
What value does executive governance deliver to organisations?
What are typical challenges that an executive governance model faces today?
The modern business environment is exciting yet challenging. New opportunities can rise to prominence with little warning, and it can be hard to keep up – not only with new market demands, but also the rising expectations of customers and employees.
Given executive bodies’ pivotal role in delivering corporate strategies and capitalising on market opportunities, they cannot be insular to market and business evolution. Common challenges for executive governance bodies include:
01
Executive body formation The absence of standardised processes that guide the formation, enhancement or dissolution of executive governance bodies may result in misalignment between existing/new committees and respective needs of the business.
02
Executive committee empowerment Limited authority may compromise an executive committee’s ability to deliver on its mandate and efficiently make decisions to seize opportunities or address issues promptly.
03
Executive committee membership Executive committees simply continue as they are, with no real plan to bring in new talent for ensuring the right balance of expertise, adequate representation of business verticals or geographies and independent advice.
04
Committee performance evaluation Without structured performance assessments, committees may perform sub-optimally and opportunities for enhancement and learning can be missed.
05
Succession planning The absence of executive succession planning can present significant challenges for organisations, including business disruptions, hindered strategic execution and uncertainty among stakeholders.
What can we learn from leading executive governance models?
- Executive governance structure
- Composition and empowerment
- Succession planning
- Performance evaluation and training
- Ethical, social and sustainability commitments
- Enabling resources and tools
Executive governance structure
Benchmarked entities established a variety of executive committees, councils and forums based on rigorous assessment of business needs. These bodies include:
Executive management committee: Reviews the corporate strategy and manages its execution, overseeing business operations, budgets and compliance with policies and regulations.
Investment committee: Oversees the organisation’s investment strategy and decisions, managing the investment portfolio and monitoring its performance.
Health, Safety, Security and Environment (HSSE) council: oversees the development of HSSE policies, monitors respective policy compliance and manages HSSE risks.
Environmental, Social and Governance (ESG) committee: Develops ESG strategy, integrates relevant practices into business strategy and operations, and monitors compliance with sustainability standards and regulations, issuing reports accordingly.
Tendering committee: Responsible for overseeing the tendering process, assessing bids, awarding contracts and approving/endorsing contracting decisions.
Ethics and compliance committee: Promotes ethical standards and compliance with laws, regulations and internal policies, conducts violation investigations and provides guidance.
Information strategy committee: Develops and implements digital transformation initiatives, maintains digital security and resilience, and harnesses the power of data.
Composition and empowerment
Benchmarked executive committees generally share the following features:
- A direct functional reporting line to the CEO to enable visibility and accountability.
- Composition featuring a chair, vice-chair and members appointed based on their respective capabilities and experience to produce better debate and stronger decisions.
- Committees’ size and make-up that sufficiently ensures representation from key functions, business verticals and regions. Such diversity is important, extending to both internal executives and external advisors, as it ensures broad representation and the widest range of independent viewpoints.
- A structured tenure policy that promotes an appropriate balance between retaining experienced members, who provide stability and continuity, while introducing new ones, who bring innovative ideas and fresh perspectives.
- A charter that defines committee mandates and scope of authority in a manner that embeds accountability and supports business priorities.
- A delegation of authority matrix that outlines the authority allocated to each committee by the CEO, in line with the corporate risk appetite, to adequately empower it to deliver its mandate.
Succession planning
A well thought-out succession plan for executive governance bodies ensures that the organisation always has access to capable and diverse leadership. It aims to identify and develop a pipeline of future leaders for maintaining organisational resilience in the face of leadership transitions and changes. Succession metrics and leadership pipelines are also regularly reviewed to identify areas for improvement and adaptation to changing business needs and market dynamics.
Performance evaluation and training
The performance of the benchmarked executive governance bodies and their respective members is assessed periodically against an agreed criteria, to maintain their strong sense of purpose and value to the company. Evaluation outcomes are reviewed by the CEO, and consequently leveraged to inform governance enhancement initiatives and training programmes.
Ethical, social and sustainability commitments
Organisations today are judged by customers, investors, employees, new recruits and regulators against their ESG commitments. Leading organisations tend to bring these responsibilities together under an ESG committee, under the direct leadership of the CEO to effectively achieve targets and garner the trust of key stakeholders.
Enabling resources and tools
The executive secretariat role has evolved and become more strategic in recent years. Its remit now includes supporting executive committee members to fulfil their duties and advising them on their responsibilities within evolving regulatory landscapes. Executive secretariat structures vary, depending on the type of organisation, size and future growth. Additionally, technology solutions have enhanced the governance of executive bodies, enabling the automation of critical tasks, centralised data management, and robust corporate reporting and regulatory compliance.
Looking ahead:
The role of the CEO has evolved significantly in response to the increasing complexity of modern business environments. As such, a robust executive governance model is essential for supporting CEOs with managing their expanding responsibilities effectively.
By implementing proven leading practices, an executive governance model can facilitate delivering on business growth targets while adapting to the evolving needs of the market to achieve sustainable success.
Leading organisations emphasise fit-for-purpose executive governance through clear structures, specialised committees, empowered decision-making with accountability and effective succession planning. Robust reporting ensures timely insights, while performance metrics and regular evaluations drive improvements. Embedding ethics, corporate values and ESG targets aligns governance with long-term goals.
Organisations that invest time and thought into strong executive governance are better equipped for the modern business climate – and more agile, responsive and future proof in a landscape that is continuously changing.
About the report
As part of our research into leading executive governance practices, we engaged with PwC global offices in countries such as Singapore, Spain, Japan, and the Middle East. These discussions provided valuable insights into diverse governance models and frameworks, based on specific industries.
However, due to the confidential nature of executive governance and limited data availability, our research did not follow a structured methodology for surveys and analysis. It is important to note that governance frameworks are highly contextual; a model effective for one company in a particular industry may not be suitable for another in a different sector.
How executive governance shapes organisational success
Contact us
Adnan Zaidi
UAE Risk Leader and Middle East Assurance Clients & Markets Leader, PwC Middle East
+971 56 682 0630
