Trends shaping corporate governance in 2024: Five areas to watch

  • Publication
  • 3 minute read
  • January 10, 2024

In 2023, national and global economies continued to recover from lingering COVID-19 disruption, with persistent job growth and rising productivity convincing economists to revise their recession predictions; global supply chains continued to adjust for Russia’s ongoing war on Ukraine. Divided US government stymied major policy shifts, a relief to some business leaders seeking stability, but the events in Israel and Gaza brought immediate geopolitical and reputational risks for business leaders and companies.

Over the past year, boards found themselves dealing with new investor pressures, ESG disclosure guidelines and SEC rules. Extreme weather events have forced rethinking of siting and supply chains even as climate-related strategies have wavered in the face of on-again-off-again state and federal shifts over green incentives and regulations. Social media turmoil disrupted corporate communications. And the rapid ascendance of generative AI has profoundly impacted business model reinventions already in progress.

Boards can’t count on 2024 being calmer, especially with the US presidential election already looming over corporate decisions and stances in a hyper-politicized environment. Directors will need to work to stay current with issues impacting oversight.

Here are the five trends to watch in 2024.

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1. A fraught geopolitical environment

We expect the unstable national and global economic and political environment to create intense uncertainty. Geopolitical tensions will persist, with the impacts of the war in Ukraine and the events in Israel and Gaza lingering and violence flaring around the globe. Populist political leaders’ recent electoral success suggests ongoing or even worsening public concerns over immigration and safety, even as climate change and weather events force population migrations.

2. The rising prominence of ESG Economics

The term ESG may have become a target for conservative activists and officeholders, but business leaders can’t minimize how climate, human capital and ethical dealing affects supply chains, customer bases, materials availability and more. Sustainability has an increasing impact on the bottom line. We see boards shifting from a regulatory focus to asking management what steps the company is taking toward sustainability, and how those steps will affect the business.

3. Increasing shareholder activism

The headlines may be smaller and less frequent, but shareholder activists are initiating actions at pre-COVID levels. Universal proxy has created general uncertainty for boards while giving activists opportunities and leverage: Experience shows they can win concessions and even board seats by approaching the company. Pushing back and facing a potential proxy fight appears more perilous based on the limited sample in the months since the universal proxy’s institution, although activists have been rebuffed in some cases. The one commonality across every situation: The focus on individual directors has increased.

4. Fortifying the integration of strategy and risk governance

All of the above-mentioned threats — and more — are changing the risk landscape, more rapidly and dramatically than ever. Additionally, companies face an interconnected catalog of breakthrough technologies and unexpected situations that blend risk and opportunity, from climate change-driven natural disasters to generative AI. Boards need to pay attention to strategy, the interconnectivity of the risks, and existing risk governance structures, practices and reporting. Risk governance should consistently account for a significant portion of the agenda to ensure that the board can provide timely oversight.

5. A greater focus on board culture

Effective oversight, and keeping pace with regulatory changes and technological breakthroughs, require that a board be able to make informed, considered decisions that draw on the full range of views and experience. And that means that boards should examine their own culture — whether they’re succeeding in productively tapping into their own wealth of expertise to raise the right questions. Many directors assume that if everyone seems to be getting along and meetings are free of open hostility, the board culture is good enough. But an absence of disagreement doesn’t necessarily indicate peak performance.

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Maria Castañón Moats

Maria Castañón Moats

Leader, Governance Insights Center, PwC US

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