As the world grapples with a multitude of economic and geopolitical challenges, corporate governance has never been more crucial. In 2023, the interplay of rising interest rates, inflation, supply chain disruptions, and global conflicts has created a complex and demanding landscape for businesses. Against this backdrop, corporate governance practices have come under increased scrutiny, with regulators, investors, and stakeholders demanding greater accountability and transparency from companies.

Before the year closes out and everyone shifts their view to 2024, I thought it would be valuable to take a backwards forensic look at some of the corporate governance highlights of 2023.

ESG Pressures from the SEC

The Securities and Exchange Commission (SEC) has taken a more proactive stance on environmental, social, and governance (ESG) matters in 2023. The agency has proposed new rules that would require companies to disclose more information about their climate-related risks and emissions, as well as their workforce diversity and pay equity practices. These proposed rules reflect the SEC’s views that ESG factors are not just social issues but also financial risks that can impact a company’s long-term viability.

Potential Increased Regulation

In addition to the SEC’s ESG initiatives, there is a growing trend towards increased regulation in various industries, especially in technology. This is due in part to the rise of new technologies in generative AI and machine learning, as well as a growing public concern about the potential negative impacts of these innovations. As regulatory scrutiny intensifies, boards of directors will need to stay abreast of evolving regulations and ensure that their companies are compliant.

Collapse of SVB

The collapse of Silicon Valley Bank (SVB) in 2023 sent shockwaves through the technology industry. SVB was a major lender to startups and venture capital firms, and its failure highlighted the risks associated with highly concentrated lending practices. This case serves as a reminder for boards of directors to carefully manage their companies’ risk profiles and to diversify their sources of capital.

Budweiser Backlash

In early April 2023, Bud Light sparked controversy by partnering with transgender influencer Dylan Mulvaney for a promotional campaign. Budweiser faced backlash over the controversial marketing campaign with some critics calling for a boycott of the brand and others complaining that the company did not defend Dylan Mulvaney from critics. The controversy impacted Bud Light’s sales, although the exact extent is debated. The episode highlighted the challenges of brands navigating cultural and political divides in their marketing strategies. This incident highlights the importance of corporate social responsibility and the need for companies to be sensitive to the potential impact of their marketing campaigns.

SolarWinds CISO Charged for Cybersecurity Failures

The SolarWinds cyberattack of 2020 was a stark reminder of the critical importance of cybersecurity for businesses. In 2023, the former chief information security officer (CISO) of SolarWinds was charged with failing to adequately protect the company’s systems from the attack. This case highlights the need for boards of directors to take cybersecurity seriously and to hold their management teams accountable for ensuring that their companies have robust cybersecurity measures in place.

OpenAI Ousts and Reinstates CEO Sam Altman

In 2023, the board of OpenAI, the non-profit research company behind the ChatGPT chatbot, made the controversial decision to oust its co-founder and CEO, Sam Altman. Altman was later reinstated after a majority of OpenAI’s members voted to overturn the board’s decision. This incident underscores the importance of boardroom dynamics and the need for effective communication and decision-making processes.

Learnings and Takeaways for Boards of Directors

The corporate governance highlights of 2023 offer valuable lessons for boards of directors. Here are some key takeaways:

• ESG factors are not just social issues but also financial risks that can impact a company’s long-term viability.
• Boards need to stay abreast of the many new evolving regulations and ensure that their companies are compliant. Perhaps it is time for boards to consider creating a policy at their companies for AI ethics and data privacy compliance.
• Cybersecurity is a critical matter that requires the attention of boards of directors.
• Effective communication and decision-making processes are essential for boardroom dynamics.
• Boards need to carefully manage their companies’ risk profiles and review managements risk posture.
• Companies need to be sensitive to the potential impact to all their stakeholders (employees, customers, investors) when navigating the complexities of social and political issues in marketing campaigns.

Looking back at the turbulence of 2023, boards must move from oversight to proactive leadership. Embracing transparency, and building diverse, future-ready teams will not just shield against future storms, but propel their companies toward a stronger future focused on growth for your corporations unique value.

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