Report Looks At The Six Key Corporate Governance Trends For 2021

Rhea-AI Summary

S&P Global Ratings published a report on March 22, 2021, outlining six significant corporate governance trends for 2021, emphasizing resilience in crisis management amid the pandemic. Key trends include enhanced diversity on boards, increased ESG competency, focus on board effectiveness, integration of ESG metrics with executive pay, growing shareholder activism on environmental issues, and demands for tax transparency. The report highlights the need for companies to prepare for systemic challenges like climate change and improve their governance frameworks.

Positive

• Increased focus on diversity and female leadership in corporate governance.
• Growing integration of ESG metrics with executive compensation aligns interests of executives, shareholders, and society.
• Heightened shareholder activism signals a demand for stronger governance on environmental and social issues.

Negative

• Increasing pressure on boards may lead to challenges in managing multiple external mandates.

MADRID, March 22, 2021 /PRNewswire/ -- The pandemic will accelerate 2020's governance trends this year, particularly those centred on addressing environmental and social challenges. S&P Global Ratings looks at the year ahead for corporate governance in its "Six Key Corporate Governance Trends For 2021," published today on RatingsDirect.

"Last year was challenging for companies and their boards," said primary contact Bruno Bastit. "The pandemic laid bare the resiliency--or lack thereof--of companies when it comes to facing a crisis and being responsive and adaptable. It was very much a litmus test for governance and created a lot to draw on for 2021. It showed in particular how truly ready companies are to prepare for another systemic challenge: climate change. The pandemic has heightened the need for effective crisis management and has emphasized the importance of stronger board engagement in and oversight of ESG issues."

We see six key trends dominating the corporate governance narrative in 2021:

• Diversity will continue to dominate the corporate governance agenda. Increasing female participation in leadership roles is one of the many areas boards are addressing.
• We also expect boards will face increasing pressure to become more ESG competent and demonstrate the skills needed to prepare for and navigate other challenges such as climate change.
• There will be a heightened focus on board effectiveness. Directors are having to consider an increasingly broad range of issues, which is increasing pressure on boards to limit the number of external mandates a director can have. This will help ensure members can be fully dedicated to the boards on which they serve.
• The closer integration of ESG metrics with executive pay will gather pace. This will ensure a longer term focus on and alignment of interests between companies and their executives, shareholders, and ultimately society.
• We also foresee greater shareholder activism on environmental and social issues, spurred mainly by the Say on Climate initiative.
• In terms of tax transparency and fairness, governments and regulators, as well as society broadly, are stepping up demands for better disclosure about where and how companies pay taxes.

This report does not constitute a rating action.

The report is available to subscribers of RatingsDirect at www.capitaliq.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to research_request@spglobal.com. Ratings information can also be found on S&P Global Ratings' public website by using the Ratings search box located in the left column at www.standardandpoors.com. Alternatively, call one of the following S&P Global Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4009.

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SOURCE S&P Global Ratings

FAQ

What are the six key corporate governance trends for 2021 according to S&P Global Ratings?

The six trends are: increased diversity in leadership, enhanced ESG competency among boards, focus on board effectiveness, integration of ESG metrics with executive pay, greater shareholder activism, and demands for tax transparency.

How did the pandemic influence corporate governance trends in 2021 for SPGI?

The pandemic highlighted the need for effective crisis management and stronger board engagement on ESG issues, accelerating governance trends from 2020.

What is the significance of ESG metrics in executive pay for SPGI in 2021?

Integrating ESG metrics with executive pay is expected to align the long-term interests of companies with those of their executives and shareholders.