Each year, there is a change in corporate governance standards to evolve, with the rapidly changing corporate landscape and keeping pace with changing investor priorities.
Board members are encouraged to start 2020 by assessing these corporate governance issues:
In 2019, CEO turnover and layoffs increased. More than 1,000 CEOs fell in the first three quarters of 2019, according to a report by Challenger, Gray and Christmas - 1,160 executives, to be exact. This trend should prompt committees to reassess their research and succession practices and to focus more on ensuring the existence of a CEO ready to respond to a bank emergency. Count on the real-time nature of social media to pressure meetings in crisis to make faster decisions. When the scandal comes, an inevitable change of CEO is expected, as happened recently with Boeing.
The millennial generation represents a large percentage of customers, workers, suppliers, partners, and investors. By 2020, Generation Y will comprise half of the U.S. workforce and, by 2025, 75% of the global workforce. Companies like Ernst & Young and Accenture have already reported that the millennial generation represents more than two-thirds of the total workforce. The secular workforce is flourishing and inspired by companies that invest in their training and development. Examine your human resources organization and redefine it for this decade as a competitive differential, investing in the internal talent pool. Expect continued pressure from investors for advice on achieving a minimum of 35% gender diversity and increased attention to ethnic diversity. Institutional investors will begin to focus on the long term limits as these European policies are put in place.
In 2020, the boards of directors should tackle the question of "the objective of the enterprise" and could widen their purpose to include different groups, besides the shareholders. In 2019, the "Round Table Statement," in which 180 chefs signed a statement regarding companies that respond and commit to adding value not only to shareholders, but to all stakeholders, including employees, customers, communities, suppliers, and of course, shareholders This included adopting sustainable practices in all businesses. This more all-inclusive definition of stakeholders is broadly supported by government groups from the central index funds and pension funds. Boards of directors should consider how the company can position itself and communicate how companies with specific objectives, integrity, and high standards are treated ethically.
The Caremark standard for director risk monitoring will require greater focus and attention from board members to ensure that there are rigorous risk management programs. Boards should closely work with the management and support their efforts to monitor risk factors closely. Depending on the specific sector of your business (e.g., CPG, food, and beverages, etc.), the board of directors must pay sufficient attention to the main compliance risks, whether these are food safety risks or other risks. There are a growing number of requests from regulators of GDPR privacy to the FCPA and anything else in the area of compliance. Compliance is an issue that should raise the agenda of the board of directors.
Manage challenges to present to the board an assessment of where digital transformation and technological empowerment are. For each product/service, the risk is higher than the cyber. Understand where your business is in terms of resistance-less travel during web transactions, to get costs in the supply chain using A.I. and ML information.
One of the main trends in 2019 was to tackle the problem of gender inequality between boards; this is due to a study carried out by Mckinsey at the end of 2018 on the role of women at work and their significant lack of professional representation, and more particularly on women of color.
As we enter 2020, these cultural changes will continue, and boards should be able to adapt to changes in the workplace and be prepared for the problems that working women may face when they begin to have better access to the continuation of their professional careers.
The digital world will be at the center of the stage in meeting rooms as 2020 approaches, from cryptocurrencies to innovative technologies, such as artificial intelligence and machine learning: they will be at the fore of research and growth of many companies, regardless of the sector.
The board of directors must be informed of the latest technological advances and have a thorough knowledge of how these emerging technologies will affect their activity. Companies and boards that adopt the new technology will be more efficient and, if used correctly, will be more transparent and accountable for their actions, which will be welcomed by shareholders and investors.
By 2020, stakeholders, investors, and activists around the world will face increasing pressure to make decisions that are not detrimental for businesses, but also the planet.
Consumers are more aware than ever of how their actions or acquisitions can affect the world we live in and, therefore, make more informed decisions in the workplace. Boards of directors in all sectors must take this into account when making important business decisions that can influence consumers' buying habits.
While it is ideal for getting good profits for investors, they still need to maintain a certain level of corporate social responsibility and cannot reap the benefits if it affects the long-term sustainability of the business.
In the United States, presidential elections will also have a significant impact on the business community, as investors and stakeholders will likely want to see what type of political campaign and Council chooses to support and spend.
In Belgium, the Belgian Corporate Governance Committee will publish a new corporate governance code, called the C.G. 2020 code, and will apply to financial years from January 1, 2020. However, companies can also choose to adhere to the code for this reporting year.
Cybersecurity will continue to be an essential trend in many industries, not just in technology, as we head into 2020. Stakeholders will want to see how well boards respond to cyber-attacks and preventative measures to ensure that the data are safe, and customers remain as confident as possible.
In the event of attacks, stakeholders and investors will rigorously examine whether oversight of the management of the business has been the leading cause, which will force board members to make decisions on how to manage these errors.
The more the public is aware of how their data is processed and used, due to media coverage, investors will pay particular attention to the extent to which the board of directors can protect user information.
The board will likely be introduced to consultants who have cybersecurity experience and who can provide new ideas that other board members may not have.
By 2020, businesses will undoubtedly have the opportunity to track these changes in the business environment and manage their impact. Ask yourself if the board or co-director is prepared and fully equipped to respond and adequately respond to these trends.
Advanced Accounting & Tax Planning