Terry DavidCorporate governance: practical steps boards can take to strengthen oversight and trust
Strong corporate governance is essential for long-term value creation and stakeholder trust. As stakeholders demand more transparency and companies confront faster-changing risks, boards and executives must evolve governance practices to remain resilient and credible. Below are key priorities and practical steps to elevate governance without adding unnecessary complexity.
Board composition and capability
– Prioritize a skills-based board that balances industry experience, financial acumen, technology and cyber knowledge, and sustainability expertise.
– Introduce a regular, structured board evaluation process to identify capability gaps and training needs. Use external facilitators periodically for fresh perspectives.
– Strengthen diversity beyond demographic metrics—include diversity of thought, background, and professional experiences to improve decision-making.
Risk oversight and enterprise resilience
– Elevate enterprise risk oversight by ensuring the board receives integrated risk reporting that links strategic goals to principal risks.
– Make cyber resilience and data privacy visible at the board level. Require scenario-based briefings from management and independent experts on potential business impacts.
– Adopt forward-looking stress testing and scenario planning for major disruption vectors such as supply-chain shocks, regulatory shifts, and market volatility.
ESG and sustainability integration
– Treat environmental, social, and governance factors as strategic drivers, not reporting checkboxes. Tie sustainability targets to business strategy and capital allocation.
– Align executive and board incentives with measurable ESG outcomes, ensuring remuneration structures reinforce long-term performance.
– Improve transparency by presenting material sustainability information alongside financial disclosures, using established reporting frameworks where appropriate.
Transparency, disclosure, and stakeholder engagement
– Enhance disclosure quality by focusing on materiality: provide investors and stakeholders with decision-useful information rather than exhaustive, unfocused reports.
– Implement proactive stakeholder engagement plans that include shareholders, employees, customers, suppliers, and communities. Track feedback and show how it influences strategy.
– Prepare concise, accessible communications for diverse audiences—clear governance explanations build credibility and reduce reputational risk.
Culture, ethics, and tone at the top
– Embed ethical leadership through clear policies, consistent enforcement, and visible accountability for misconduct.
– Monitor organizational culture using both quantitative metrics (turnover, whistleblower trends) and qualitative inputs (employee surveys, exit interviews).
– Reinforce the board’s role in modeling culture by reviewing leadership behavior and succession planning regularly.
Audit and financial integrity
– Ensure the audit committee has the independence and expertise to challenge management and external auditors effectively.
– Focus on quality of earnings, internal controls, and the sufficiency of accounting resources. Require timely remediation of control weaknesses.
Practical checklist for boards
– Conduct a skills gap analysis and update board recruitment criteria.
– Mandate periodic cyber and privacy briefings with tabletop exercises.
– Integrate ESG metrics into strategic planning and incentive systems.
– Implement an annual board evaluation with follow-up action plans.
– Strengthen stakeholder engagement and publish a concise materiality summary.
Adopting these governance practices helps organizations navigate complexity while building durable stakeholder trust. Boards that prioritize capability, transparency, and proactive risk oversight position their organizations to seize opportunities and withstand shocks without sacrificing accountability.