Governance, in all its forms, has become an increasingly discussed topic in the last 25 years. With the rise of ESG more recently, and the memory of large corporate scandals looming over the last two decades, governance is an important part of the modern corporate world.
In order to understand just how important the concept of governance and corporate governance has become, it’s important to understand how it has evolved and changed over time. In the last 25 years, we have seen a shift in governance, how companies operate and what the corporate agenda focuses on.
So let’s follow the journey of governance, as we enter into the 25th year of the century.
What is Governance?
Governance comprises all aspects of leadership and decision-making. It is the structures in place that allow a leader in any organised body to rule or control or dictate actions.
Governance can be written down in terms of the corporate governance code, which is a voluntary code and applies predominantly to the larger organisations, listed companies globally.
In the UK, a Code of Governance is a set of rules decided by an organisation that outlines their:
- Company Structure.
- Roles and Responsibilities of their Board Members, Executive Directors and Senior Leaders.
- Processes for issues, namely what gets the Board’s attention.
- The ESG goals and core values of the organisation.
The UK’s Corporate Governance Code has evolved over time, as corporate governance has also.
Corporate governance is a separate concept to governance codes, and is considered a more general, holistic approach to governance within an organisation.
Let’s go through the timeline of how governance has changed over time, and look at where the focus is for corporate governance now.
Governance Over The Last 25 years: A Timeline
The evolution of corporate governance is extensive, intricate, and filled with complexities. This subject encompasses the responsibilities of management, the composition of boards, and the rights of shareholders.
Over the centuries, the distribution of authority and decision-making among board members, company executives, and shareholders has continually changed. This has generated significant discussion amongst experts, regulators, business leaders, and investors, highlighting the importance of understanding corporate governance history to grasp its current significance.
While the concept of governance has existed for a very long time, with the rise of major chartered companies in the 16th and 17th century, the term ‘corporate governance’ didn’t come into use until the 1970s, mostly in the United States.
After World War II, economic growth put a large amount of power behind corporations. This led to the need to define the leadership structures in place, and so the concept of corporate governance was formed.
During the 1980s, the increase in aggressive takeovers led to heightened attention on the rights of shareholders and board responsibility in governance discussions.
In 1992, the U.K.’s Committee on the Financial Aspects of Corporate Governance published the Cadbury Report. The report outlined good governance practices as well as introduced the principle of “comply or explain”.
Then in 1998, the U.K. Corporate Governance Code replaced the Cadbury Code of Best Practice, incorporating broader governance principles. You can learn more about the details of that here.
The UK was the first country to introduce a detailed corporate governance “code”, and it has since been adapted in many countries across the globe.
Following the Enron Scandal and the ripple effects it had on governance in the 2000s, the UK Government published the Higgs Review in 2003, which focused on the effectiveness and independent role of non-executive Directors in corporate governance.
By 2007, financial institutions were engaging in overly risky practices, raising alarms about a potential breakdown of the global financial system. The failure of the Lehman Brothers firm triggered an international banking crisis, marking the most severe financial turmoil since the Great Depression of the 1930s.
This then led to the 2008 financial crisis, which led to several changes to corporate governance and how it was approached, much like the Enron Scandal of the early 2000s.
This all culminated in the separation of financial review and corporate governance with two new codes: the Stewardship Code, which focused on financial reporting, and the UK Corporate Governance Code.
The fallout from the financial crisis placed a larger focus on best practices for corporate governance throughout the 2010s. There was more pressure on Boards of directors to implement good governance practices that focused on accountability and transparency.
These developing governance principles encouraged corporations to turn their attention to their board composition; having a majority of independent directors and a diverse board.
Technology also became a prominent aspect of governance, with new software improving efficiency and workflows, while also introducing new risks as well.
Data breaches emerged as a significant concern for companies. Cyber threats and attacks have developed as technology has, and so cybersecurity has now been an important feature of the corporate governance agenda in recent years.
Instability and uncertainty has been a big theme of the 2020s, and not just for governance. With the COVID-19 pandemic, the entire world has had to adapt to the changes and crises this has brought. Corporate governance has had to transform itself to function in the last few years, with lockdowns interrupting how organisations operate and the breakdown of the supply chain.
Consumers’ focus on transparency and accountability since the 2010s has only increased, with renewed attention on environmental, social and governance (ESG). Now more than ever, stakeholders and the general public are expecting corporations to understand and mitigate their impact on the world around them. New ESG regulations have only exacerbated this, and ESG became a crucial part of corporate governance in the 2020s.
So, How Has Governance Changed In The Last 25 Years?
The timeline we’ve just taken you on shows how corporate governance has changed over the last 25 years, how the landscape has adapted and developed to challenges, and where the focus of governance is now.
Now, we’re going to go through and summarise just a few of the key themes and topics that demonstrate what position corporate governance is in now, and what exactly the changes that have taken place are.
The UK Corporate Governance Code has been updated several times, the latest of which was in 2018 and divided into 5 sections: leadership, effectiveness, accountability, remuneration and relationship with shareholders.
These sections highlight clearly where corporate governance is now, and how it has evolved since the Corporate Governance Code was first introduced. Governance in 2025 focuses itself on Board Composition, Effectiveness, Accountability and Transparency, ESG, and Technology and Cybersecurity.
Board Composition
A clear development in corporate governance has been Board composition. Not only with the increased importance of independent directors, but also in diversity. Corporations are beginning to understand the need for a well-composed, diverse Board filled with different perspectives that can be brought to the table.
While there is a way to go in fostering Board diversity in the corporate world, one cannot deny the necessity of having inclusive Boardrooms. It ensures a range of opinions and experiences, enabling fresh new insight, better decision-making and good governance.
Effectiveness, Transparency and Accountability
Effectiveness is one of the five factors in the most recent UK Corporate Governance Code, and for good reason. Corporate governance has to be effective and efficient now more than ever. There is an increased focus on Board members possessing the necessary skills and knowledge to govern effectively.
As well as this, due diligence has become another significant part of governance. Corporate governance has weathered scandals and economic crises, so there is an increased emphasis on the analysis and evaluation of all decisions made in the Boardroom to avoid repeating past mistakes.
This also means being transparent, and allowing shareholders, stakeholders and the general public access to information in order to hold you accountable. Audit trails are an effective way to do this, as well as establishing effective risk management processes. More and more corporate governance has evolved to emphasise this accountability and transparency, and ensure Boards are effectively run.
ESG
ESG has become a big focus in recent years, with the looming climate crisis, and governance is a huge part of this. Corporate governance has become interlinked with sustainability.
ESG and sustainable practices play a new role in the corporate agenda, and will continue to be a prominent part of decision-making.
ESG reporting has also had increased focus, with regulations demanding clear, effective and informative ESG reports from corporations. There have been several evolutions in ESG regulations in recent years, like the ISSB and the CSRD, and there is only more to come.
The pandemic has seen a shift in attitudes towards corporations and employers, and more is being expected of them than ever before in regards to sustainability.
Technology and Cybersecurity
With the rising use of technology and the advancements in the field, it only makes sense that corporate governance has also evolved to include technology as an important part of its functioning.
This also means there has been a renewed focus on cybersecurity, and having security measures in place as preventative measures against attacks.
Software that helps Boards perform more effectively, and enhances their security to protect them from potential cyber threats, is becoming commonplace in many organisations, large and small.
Whether the technology is a Board portal, a reporting software, a governance platform or risk management software, Boards are taking full advantage of how governance can be improved with the aid of these new tools.
How Convene Can Help Your Corporate Governance
Corporate governance is more important now than ever. It is the standard on which corporations will be held to, and so the time to have good governance practices is now.
Governance has changed significantly in the last 25 years, and how it will change in the next 25 years is uncertain. But, there is no doubt it will continue to evolve to meet the needs of the times.
Convene is here to support you in your governance journey, and to continue helping to improve corporate governance for the next 25 years. We want you to achieve good governance in the boardroom and beyond.
A Board Portal is a major step in the direction of good governance. Convene’s Board portal software is designed to create a good governance structure for your Board by making communication easier and more effective, as well as enhancing security.
Our comprehensive features include:
- A Document Library, with role-based access to ensure your sensitive documents are protected.
- A built-in Audit Trail, so you can be sure you are compliant with all regulations.
- Integrated Video Conferencing, so you can make the switch from remote to hybrid working seamlessly, whilst still viewing your Board Pack all on one screen.
- Surveys, with the option for anonymity, so you can be sure you are aware of your employees’ opinions.
- Action Items, so you can follow up on any tasks automatically.
- Accessibility Features, including text-to-voice, which makes us the leading accessible Board Portal.
- Fully GDPR-compliant security, including AES 256-bit encryption and ISO 27001 accreditation.
Convene also has our very own reporting tool: Convene ESG. Designed in collaboration with our clients, Convene ESG makes reporting simple, so you can focus on developing your sustainable governance strategies.
Our aim is to alleviate some of the challenges of data gathering, key performance tracking, and reporting, so corporations can move towards net zero. They are able to organise their report, track progress, assign sections, automate reminders and see best practice. The solution will create a Word document ready to publish or edit as necessary!
You can learn more about what Convene can do for your organisation, and your governance, here.
