Global Trends of Corporate Governance in 2022

Corporate Governance

Contrary to the hopes and expectations of governance observers and board members, stakeholders’ and investors’ interests in board effectiveness have increased over the years. This increased interest may drive a few global trends for the year, including those identified below;

Investors expect more from boards.

Investors now demand more in terms of actions and disclosure on important topics. They are more than ready to move against companies and individual directors who fail to meet those demands when necessary. 

Increase corporate attention to the climate. 

Climate change has proven effects on individual businesses and society at large. That is why investors now expect companies to adopt higher standards in tackling climate-related efforts and challenges and good progress reports. Decarbonizing the global economy is an ongoing process, and stakeholders demand companies contribute to achieving this goal. 

Enhanced board effectiveness practices. 

Investors and stakeholders expect companies to adopt proper composition, refreshment, and evaluation practices to enhance corporate performance and minimize risk while improving overall board effectiveness

Equity and diversity now take center stages. 

The enterprise and the boardroom will witness some level of urgency regarding corporate equity and diversity on the request of stakeholders, with proven reports of diverse organizations doing better than others. 

We can also expect increased activities in and around decision making and implementation of new regulations, with special interests from both the stakeholders and shareholders. As a result, boards and directors will witness even more scrutiny and public oversight in 2022 and beyond – more than whatever they have seen before. 

With all these said, let’s look at some popular trends according to regions and how we arrived at the current situations. 

2022 Regional Trends Predictions

Canada and the United States

There will be more demand regarding environmental oversight, performance, and reporting. 

We have seen investors prioritize companies’ environmental oversight, performance, and reporting over the years. However, in recent times, investors have adopted more stringent proxy-voting guidelines, especially among the largest asset managers in the global economy. For instance, Vanguard’s latest 2022 proxy-voting guidelines identified “material risk-oversight failures” as one of the reasons to possibly vote against directors, alongside climate risk oversight. 

Furthermore, while there is mandated disclosure in place to ensure companies are open about sustainability efforts, there will be increased demand for clarity from large shareholders and stakeholders, even outside the legal purview. Companies can meet these demands by outsourcing oversight responsibilities to boards while ensuring improved communication and shareholder engagement on these issues. 

More assertive shareholders, leading to enhanced corporate shareholder-engagement programs.

It is normal to see investors push for a change in the course every proxy season. However, shareholder assertiveness will push new boundaries this year, rather than the usual confinement to the “E” of “ESG.” 

Votes against directors were more than ever before in 2021, same with votes for shareholder proposals. The trend will extend into 2022, with shareholder proposals expected to get a majority or significant support. The same can be expected of environmental proposals and proposals regarding corporate political involvement, inclusion, equity, diversity, and shareholder rights. 

More interest in DE&I, culture, and human capital management.

The majority of stakeholders agree that diversity within workforces, C-suites, and boards indicates a diverse global society. It is also seen to enhance governance, leadership, reputational strength, and financial performance. Therefore, the demand for board diversity and board effectiveness will be more represented in mandates. 

Corporate relations with employees will also take center stage. Corporate relationships have evolved in the past two years, with workers being more demanding. Furthermore, there are projections of the increased importance of various employee topics, including income equality, childcare, mental health, return to work, and corporate culture. 

Board effectiveness, including refreshment, evaluation, and composition, will take center stage. 

The advocation for proper board effectiveness and composition has never waned. However, boards will be expected to continuously commit to self-assessment and refreshment planning. According to ISS, the best way to achieve board effectiveness and refreshment is via a continuous program of individual evaluations of directors. As a result, we already see investors and proxy advisors demanding robust board assessment programs. 


A few Brazilian companies are not only creating advanced climate initiatives beyond leadership accountability and greenwashing. But more than this, there will be increased shareholder scrutiny to ensure companies adopt sustainable environmental commitments and targets, particularly regarding the Amazon rainforest. 

The year 2022 may also witness an increase in shareholder proposals on climate goals compensations, leading to increased climate-impact disclosures. In addition, there are projections of enhanced transparency on ESG-related disclosures by the Brazilian Securities and Exchange Commission (CVM). Lastly, we can expect more calls for boards to learn more about ESG efforts. 

The S of ESG may ride on media attention to shape the reforms expected in the corporate sector. 

Shareholders will most likely shift more attention to the current economic imbalance in the region. This means boards will be under more pressure to manage risk from health, social, and reputational perspectives, ensuring that stakeholders, customers, and employees are healthy. There will be renewed demand for companies to fulfill their roles in creating access, support, and opportunities for their employees. Potential solutions will include social programs, pay equity, inclusion, diversity, education, and social programs to improve the situation of disadvantaged communities. 

Improved board effectiveness, diversity and composition. 

Investors are now more interested in the quality of board diversity and composition, particularly regarding the nomination process and professionalization of directors, diversity, tenure, independence, and boarding. 

Boards may devise more objective means of evaluating the competency of directors. In addition, there may be calls for external searches to achieve independence, especially from shareholders with little or no faith in traditional board-recruitment processes. 

Gender parity will be another hot topic in the new year, with increased demands from global investors for quick and measurable changes. As a result, actions like recommending negative votes against boards without at least a woman may become the norm. Boards are also expected to expand their director criteria to incorporate ethnic diversity and provide the long-term board pipeline. 

Call for better overall stewardship. 

The stewardship culture in Brazil will not wane but rather include calls for better governance and risk oversight. Boards may have to review their shareholder engagement and process, which will help prevent proxy fights. The 2022 shareholder-engagement plan will most likely include ESG, board composition, risk oversight, and disaster preparedness. 

Changing public company governance. 

The absence of strong governance structures is a major reason Brazilian companies have struggled to list above. As a result, regulatory bodies will need to adopt stringent listing requirements, assessments, and enforcement actions – a major change from the previous lax assessments that only “check the box.” The advanced evaluation process may also serve as an avenue to improve individual director performance and board culture. 

European Union

EU Taxonomy launches with a focus on environmental reporting.

The European Commission’s sustainable finance strategy was adopted in July 2021. It centers on efforts to deal with environmental challenges and expand investment in a sustainable economy – major support to its “Green Deal.” The EU Taxonomy, a classification system for sustainable economic activities, is a segment of this strategy that is now active. 

With this development, financial entities are eligible to file a report according to the technical screening criteria. Furthermore, investors and companies must now disclose climate-change mitigation and adaptation objectives, as stated by the Corporate Sustainability Reporting Directive (CSRD). In addition, there will be criteria for other environmental goals and social and governance factors. 

Business people in a meeting

Increasing ESG activism and remuneration. 

With the realization that shareholder resolutions can be brought, European shareholders are now committed to tying ESG into executive remuneration. However, companies may struggle to discover the right KPIs, considering the basic nature of these metrics’ limited detailing and variability. The corporate governance code of Norway recommends keeping remuneration basic while limiting performance-related remunerators. Spain and Germany recommend ESG remuneration criteria, while France has added hers into the corporate governance code. 

More scrutiny of director diversity and capacity.

Board effectiveness and diversity will continue to be major talking points with Dutch and Spanish companies striving to reach mandatory feminine representation targets. As stipulated in the new Danish corporate governance recommendations, diversity clearly relates to “age, gender, or education, and business background.” Unfortunately, the same cannot be said for ethnic diversity in most European boards due to limited ethnic data. 

Director and board engagement will be of intense interest, especially the overcommitment of directors. Overboarding policies will change in ways yet unclear, with most experts predicting the use of a new approach. That said, proper representation of investors’ interests in the board room will continue to be a responsibility of the director. 

Implementation of Shareholder Rights Directive II.

The aims of the Shareholder Rights Directive II (SRD II) include i) enhancing the asset owner-managers’ engagement with their investee companies, ii) strengthening the rights of shareholders, and iii) driving inter-related investment chain information. However, the slow progress in the implementation of the directive can be attributed to the pandemic and inadequate preparation of market participants. 

Furthermore, investors expect better executive pay-disclosure systems, leading to votes against directors for issues related to compensation. 

United Kingdom

Climate change is crucial, fresh disclosure expectations in the pipeline. 

Environmental issues, especially climate-related topics, top the agenda in the UK voting season. Based on the recommendations of the TCFD, major companies and financial institutions are expected to fully comply with mandatory disclosure of climate-related financial information from April 2022. In addition, the establishment of the International Sustainability Standards Board (ISSB) means the UK will fully embrace its issued standards. The UK government has also asked all companies listed in the country to publish their plans for the net-zero transition by 2023. 

Inclusion, equity, and social justice remain crucial. 

The UK fully addressed the “E” of ESG in 2021, but not the “S.” Investors remain keen on board effectiveness and diversity, especially amongst executive directors and other top roles. The same level of scrutiny is extended to the role of the board in inclusion and diversity. Furthermore, we may see investors voting against chairs of nomination committees with poor board effectiveness and diversity.

The UK’s Financial Conduct Authority (FCA) will roll out new listing requirements to improve board effectiveness, diversity and inclusion. Proposed modifications include the need for reporting consistency, improved transparency, and considering ethnic and gender background in setting up boards and executives. We may also see new diversity policies that will adopt board committees without leaving out diversity segments like socio-economic background, ability, and sexual orientation. 

The “G” is also important. 

We may see the government proposals for “restoring trust in audit and corporate governance” find their way into draft legislation this year. The recommendations champion crucial reforms affecting listed and large private companies, directors, and auditors involved in assurance, internal control, audit, regulation, and reporting. 

Furthermore, investors still prioritize remuneration as a significant governance issue, as indicated by their firm decision on remuneration within companies that benefited from government support during the pandemic. They also want shareholders to align with the senior management’s experience. 


Louder calls for the ESG agenda. 

Australian investors continue to prioritize climate change and related issues, with the first half of the year most likely to witness a few activist campaigns on the subject. This is similar to the turn of events in 2021, where we saw the first Australian company have a “say on climate” initiative. In terms of government efforts, we expect more progress in climate goal programs and policies until the end of 2022. 

Changing expectations and opportunities for board diversity. 

Board diversity will remain important in Australia. The last quarter of 2021 saw the country achieving its goal of ensuring all boards comprise at least 30% women. While every ASX200 board has women represented, there is little effort towards cultural diversity. Only 90% of ASX300 board members have an Anglo-Celtic background. 

Increased recognition of geopolitical sensitivities

The dynamic nature of the Australian geopolitical landscape is expected to persist. As a result, boards and executives of Australian companies are expected to pay more attention to the geopolitical forces driving the international business landscape. We may also see an expanded risk-assessment system that combines geopolitical risks with similar local political-risk factors. 


Stronger Japanese Corporate Governance.

Sequel to the partial revision of the Japan Companies Act, the Japan Code of Corporate Governance was also revised last year. The corporate-governance reorganization was necessary to prepare for the Tokyo Stock Exchange (TSE) reorganization in April 2022. The reorganization saw TSE switch from the four-trading market system into three, i.e., Growth, Standard, and Prime. Companies will be listed in new markets once they have satisfied the new listing requirements. Therefore, the issuers must ensure an alignment between the corporate governance practices and the new listing requirements.

Improved efforts on board independence.

According to the new Companies Act, outside directors must be appointed for some Japanese companies. Furthermore, the reviewed Code of Corporate Governance stipulates that companies listed on the Prime segment of the new TSE must have independent directors in at least two to at least one-third of their boards. This increase in independent board representation may eventually lead to a scarcity of qualified independent directors. 

Gender diversity will drive parity. 

In line with its focus on gender diversity, the new Code of Corporate Governance now demands companies to publicly set practical and measurable diversity goals. Despite being an advanced economy, women are still poorly represented across managerial positions in corporate Japan. As a result, local and foreign Japanese companies are under pressure to increase overall diversity, particularly meeting the new goal of 30% gender diversity in leadership positions by 2030. 

Sustainability and ESG disclosures will become clearer. 

The revised Code of Corporate Governance translates to stronger sustainability-related systems and principles. For example, the “comply or explain” model currently adopted by the Financial Services Agency may be replaced with mandatory disclosures regarding climate risk in line with the recommendations of the Task Force on Climate-Related Financial Disclosures. 

More activism than ever. 

We will see more campaigns championed by activist shareholders against Japanese companies. Japan is currently only second to the United States on the list of countries with the most active shareholder activism. The year 2021 witnessed several campaigns, and it is only normal for companies to prepare to respond to even more in 2022 and beyond. 

Singapore and Malaysia

A new approach to stewardship and governance. 

The Malaysian Code of Corporate Governance was reviewed and launched in April 2021, introducing fresh best guidelines and best practices on corporate governance. These guidelines will be binding on companies listed in Malaysia, helping them edge closer to higher standards. In addition, the Stewardship Principles for Responsible Investors in Singapore may be reviewed in 2022, after its initial introduction in 2016, to reflect the current global shift towards more inclusive capitalism. 

Diversity remains crucial. 

Based on the code update, all Malaysian boards are expected to achieve 30% diversity for women’s representation. The annual reports of listed companies must also disclose activities on gender diversity for senior management and boards. In addition, the Singapore Exchange now demands that listed companies must disclose their board-diversity policies, shelving the previous, less effective “comply or explain” rule. 

A more stringent approach to independence and director selection. 

Both Malaysia and Singapore run a two-tier vote for long-tenured independent directors. In Singapore, this only happens after a director has spent nine years on the board. Malaysia is on the verge of implementing a 12-year hard limit in its listing rules, after which a director will not be considered independent. Furthermore, the reviewed Malaysian Corporate Governance Code clearly stipulates the inclusion of independently sourced board-director candidates. 

Climate and broader sustainability issues will become popular. 

In the aftermath of publishing a consultation paper in August 2021, the Singapore Exchange will mandate climate reporting from 2023. The implementation will start with sectors most likely to record immediate impacts. Then, the “comply or explain” mechanism will be instituted for the other sectors. Furthermore, listed companies are expected to have internal assurance regarding the report of sustainability issues. Lastly, directors must improve their knowledge by undergoing sustainability training.


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