Are boards losing control?

One of the aims of the IoD Centre for Corporate Governance is to assess if boards have the tools and support they need to lead their companies effectively.

This involves looking at how companies govern themselves and the effect that differences in governance practice can have, but also at the impact of public policy — an area where there is considerable activity at present.

While there is always an understandable tendency to prioritise the most immediate issues, it is also important to look ahead. The decisions taken now by boards and policymakers can either help or hinder companies in the future

For this report, members of the Centre’s Advisory Board and a selection of other commentators were asked what they considered to be the biggest challenges facing companies over the next five to ten years, and what actions should be taken to address them.

The main conclusions of the report are:

• Organisations face risks that are more complex than before and the idea that they operate within a business environment that is essentially benign and quite predictable is no longer valid.
• The cumulative impact of the challenges they face has put many boards on the back foot, reacting to events rather than setting their own direction.
• Combined with an increase in the pressure from policymakers, regulators, investors and other stakeholders, this has left some board members feeling that they are no longer in control of their organisations.
• Now that governance is increasingly viewed as part of the broader ESG agenda, debate has become noticeably more politicised and views more polarised. This makes life more complex for boards, but they have to find ways to deal with it.
• Boards need to step up, re-establish their leadership role and engage more effectively with stakeholders and issues of concern to wider society. But there also needs to be a debate on how the policy framework for governance operates, with the aim of having a clearer delineation of responsibility for decision-taking between boards, regulators, investors and others.