Examining the Five Biggest Current Trends in the Field.
For nearly 400 years, corporate governance – the mechanisms and processes through which companies are regulated and directed – was a backwater of the capital market.
Today it is considered one of the key global indicators of corporate success and a test of whether businesses, shareholders, stock exchanges and regulators are equipped to meet market pressures in the twenty-first century.
The rapidly changing field was the topic of an MBA Debate hosted by the AUC School of Business on February 12, entitled “Current Trends in International Corporate Governance.” The talk was conducted by Davis during his visit to AUC and was moderated by Professor Khaled Dahawy.
To take stock of the discipline’s transformation throughout the years, Davis decided to devote his focus to defining what he considers to be the top-five trends in international corporate governance nowadays.
The first one in his eyes is what he simplistically called public policy’s “big bet.” This wager, in essence, is one that gives the market tools to police itself through empowering investors, boards and intermediaries on the assumption that each will act in the best long-term interests of their shareowners and the market as a whole. The big bet represents a stark shift from a pre-2008 structure that relied on market-risk-oversight models that ultimately led to fraud and excess.
The second trend that Davis emphasized was the importance of moving past “clubby boards” that feature a narrow range of members. “Boards [should be] more diverse, independent and climate-competent so that they are in a position to deliver better long-term returns for investors,” he stated. "Corporate boards need to have 30-40 percent of its members be women by the year 2020."
Climate change and the social media revolution were, perhaps predictably, important areas for focus moving forward as well, with many large institutional investors now putting them at the forefront of their policies in an effort to adapt to the changing game.
The fifth and final trend that Davis outlined was the voice of the citizen investor. The latest corporate governance actor, in his eyes, could very easily be the millions of citizens who supply big institutions with savings capital, but never play a direct role in proceedings thereafter. A millennial culture that embraces stewardship might prove to be the main cause of a shift in this regard.