Thoughts for Boards of Directors in 2020
Thoughts for Boards of Directors in 2020 (Harvard Law School)
In hindsight, 2019 may come to be viewed as a watershed year in the evolution of corporate governance. After years of growing alarm about endemic short-termism, the sustainability and competitiveness of businesses over a long- term horizon, and the role of corporate policies in contributing to socioeconomic inequality, there has been an emerging consensus that the prevailing corporate governance system is broken.
Initially, in the aftermath of the financial crisis of 2008, this critique was focused on short-termism as a root cause of systemic destabilization and decay. In subsequent years, the concept of sustainability gained traction, and ESG (environmental, social and governance) principles were embraced by shareholders and corporations alike as the next frontier in corporate governance best practices. This in turn laid the foundation for the latest iteration of corporate governance modernization: the advent of stakeholder governance, and the realization that the pursuit of wealth maximization for shareholders as the sole raison d’être of corporate governance has been a principal accelerant of short-termism and socioeconomic inequality. Read more…