Sarah Bell (et all) | GrantThornton
 

The first edition of New Year 2025 brings to you a review report from Grant Thornton titled ‘Corporate Governance Review 2024’ which focus on important corporate governance aspects having greater attention of Boards as well as where Boards need to work more.

Some of the key highlights from the report are as follows-

1. Value Creation through Governance:
   • Companies with robust governance enjoy higher operational efficiency (+43%), solvency (+15%), and shareholder returns (+2x).
   • Top quartile companies (2014-2024) achieved superior turnover, profitability, and capital efficiency.
2. 2024 Compliance Trends:
   • 65% of companies complied with the UK Corporate Governance Code (the “Code”), a significant rise from 39% in 2023.
   • Non-Big Four audits increased, reflecting broader market choices.
   • Revised Code requirements (effective 2025) emphasize internal control effectiveness and cultural embedding, yet only 33% of companies are ready.

Board Effectiveness and Challenges

1. Performance Gaps:
   • Strategic planning, board composition, and succession planning were key improvement areas, with tech/cyber expertise lagging in 21% of boards.
   • Quality of board papers remains a concern, impacting decision-making quality.
2. Risk Oversight:
   • Despite emerging risks like AI and cybersecurity, only 25% prioritized improving risk oversight.
   • Boards need better integration of forward-looking metrics and risk frameworks.

Stakeholder Engagement and DE&I:

1. Engagement Improvements:
   • 64% improved Section 172 disclosures, addressing employee, supplier, and environmental impacts.
   • Employee engagement saw growth, with 82% employing workforce advisory mechanisms.
2. Diversity Initiatives:
   • 83% met ethnic diversity targets; however, gender equality remains a challenge, with only 54% of boards comprising over 40% women.
   • Broader diversity (age, disability, social background) is underprioritized.

Purpose, Culture, and Sustainability

1. Defining Purpose:
   • While 96% of companies stated a clear purpose, only 17% linked it to actionable metrics.
   • Monitoring culture saw improvements, with companies adopting nuanced metrics like staff turnover trends and engagement rates.
2. Sustainability:
   • 94% linked strategies to sustainability. However, new regulations (e.g., CSRD, TCFD) demand further readiness.

Future Governance Directions

1. 2025 Priorities:
   • Boards should prioritize adaptability, stakeholder engagement, and leveraging emerging opportunities (AI, ESG).
   • A dynamic “review and renew” approach to governance frameworks is critical.
2. Call for Leadership:
   • Leadership must address talent shortages and DE&I. The “rinse and repeat” cycle of governance needs disruption to prepare for future challenges.

(Note: IICA duly acknowledge the ownership / authorship of the report and republishing the same only for educational purpose of Independent Director.)

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