Corporate Governance 4.0: Facing Interdependency and Speed in a Complex World
20 Pages Posted: 14 Jul 2017
Date Written: July 5, 2017
Corporate governance faces growing criticism and calls for reform and regulation. Of course there are deep differences between governance models and the pressures for change they face. These differences have to be taken into consideration. Reforms and regulatory changes do provide frameworks to improve the standards of corporate governance but they fail to address major new challenges: put simply, speed and interdependency call for new rules of the game between boards and CEOs. Many of the crises we observe between boards and managers result from ignoring these challenges. When change was slow and linear the board‘s main role could be that of financial and fiduciary control, ex-post. Today the board’s role must shift to fostering entrepreneurial development, guiding long-term resource allocation under great uncertainty, setting strategic direction and exercising strategic control under shifting circumstances, a set of demanding responsibilities for which many boards are poorly prepared. This calls for new relationships with management, new priorities in both the choice of CEOs and the composition of the board, and new roles. In this paper we explore these. This paper briefly reviews the challenges of speed and complexity, analyzes their impact on the roles of boards, develops a contingency framework for specifying these roles, and draws some conclusions for governance, management and leadership for the next decade, and how these need to change.
Keywords: Corporate Governance, Board Role in Strategy Making, CEO Selection, Management and Complexity, Board Composition
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