For many American companies, 2021 represented both the best of times and the worst of times. The rollout of the COVID vaccine offered a momentary boost of energy, but this was soon dampened by the Omicron variant, supply chain issues, and problems abroad.
What will 2022 bring? This article looks at five corporate governance trends that will define 2022.
Continuing Supply Chain Disruptions
By this point, worldwide supply chain issues are impacting every industry, with little signs of ending anytime soon. As a result, American companies are struggling to meet the demands of their manufacturing and distribution processes.
While these sorts of concerns have not historically ranked highly on a board’s agenda, the present crisis has prompted many people in leadership positions to take a more active role in managing company responses.
In the past, it’s been enough to simply diversify suppliers and manufacturers across multiple geographies. Today, software provides greater end-to-end visibility for the logistics process and can even highlight areas of inefficiency or underperformance.
These tools grant corporate leadership greater control over their company’s logistics process. In 2022, you can expect senior leadership to devote time to discussing sourcing, materials, and the distribution network as part of their regular agenda.
Retaining Top Talent
Despite the attention surrounding the so-called “Great Resignation” of 2021, the best available data shows that the monthly quit rate has been rising steadily since 2009. Still, the recent attention to this phenomenon has prompted many companies to reevaluate their workplace culture in order to attract and retain top talent.
For example, many companies are evolving their benefits package to add value for their employees. This approach might include introducing wellness programs, educational resources, and benefits for new parents.
Beyond this, many companies are also asking tough questions about the workplace itself. Employee engagement surveys and exit interviews provide insight into employee morale.
While this has traditionally been the domain of human resources personnel, governance boards are taking a larger role in evaluating policies that bring stability to their labor force.
Implementing ESG Criteria
Climate change continues to be a pressing issue, particularly among corporate shareholders. With the development of Environmental Social Governance (ESG) criteria, American businesses are able to participate in initiatives aimed at ethical responsibility and environmental sustainability.
For leadership boards, this means adapting to certain benchmarks to ensure that their organizations reduce carbon emissions or source materials and inventory from sustainable suppliers. This approach significantly impacts companies in the energy sector, whose shareholders may be particularly committed to sustainable protocols.
But ESG criteria also demand greater corporate transparency, giving shareholders and even the general public a window into executive decision-making. Governance boards will need to adhere to ESG disclosure protocols and other requirements, which means that there will likewise be an increased need for understanding risk management.
Expanding Shareholder Influence
During the height of the pandemic, shareholders were forced to engage companies virtually. As restrictions eased, shareholder participation has not slowed.
If anything, there has been increased momentum among shareholders, and their active participation has become something of a meta-theme for the way companies operate moving forward.
As previously noted, the voices of shareholders are part of what’s driving companies to adopt ESG criteria. But shareholders are adding their voice on a number of topics, ranging from everyday business decisions to diversity within the C-suite.
This engagement also means that shareholders are more likely than ever before to vote against initiatives that fail to meet these expectations, even if that means voting against individual members of the governing board.
For the board itself, this means increased accountability. Corporate governance boards should stay in touch with the concerns of their shareholders and adapt to the changing social landscape whenever possible.
Safeguarding Data Privacy
Increased reliance on cloud-based technology can place sensitive data at risk. Currently, there’s been worldwide interest in giving individual consumers control over their user data.
This drive comes at the same time that U.S. tech platforms are tightening restrictions regarding the use of cookies, online tracking tools, and privacy disclosures.
What does this mean for corporate leadership? It may simply start with governance boards understanding the nature and scope of the problem.
When a company maintains customer and user data, it exposes itself to the risk of hackers and other forms of cybercrime. These risks can expose the company to lawsuits and other legal complications that can damage the company’s public reputation.
Some companies may simply adopt new policies regarding the storage and retrieval of user data, though this often proves to be a losing game in the digital world. It may become increasingly necessary for boards to augment their legal policies to prepare for any security or privacy breaches that they may incur.
Preparing for What’s Next
What will happen as we move beyond 2022? The future will mean anything but business-as-usual for today’s corporate leaders. If there’s a common theme, it’s the need to adapt to a changing landscape. Companies that maintain flexibility in the face of these trends can thrive, regardless of what the year brings.
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