Boards overboard?

Here’s a worry. EY tells us that boards may be “burning out”.

The firm spoke to 20 non-executive directors and concluded that traditional governance structures may be struggling to cope with the current “volatile” business world.

Workloads have surged, requests for investor engagement have jumped and some non-executives are struggling to understand which non-financial factors may be driving performance. About 30% of the non-execs find the classic centralised board is “poorly suited to sensing, interpreting and responding to fast-moving trends and events”. Close to half of boards, 41%, never talk about AI (astonishing given that’s all anyone seems to talk about).

Jeanne Boillet, assurance lead at EY, says those questioned by researchers report being “overloaded” and “struggling” to maintain oversight of their organisations and think about the future.

“Today’s governance model is under strain,” says Boillet, calling into question whether it can be sustained.” Now, there’s a topic for your next board agenda.

Omnibus stalls

Drama in Brussels this week after the European Parliament voted to reject taking forward the “omnibus” legislation on revised sustainability reporting rule to the next step.

It’s barely ten days since Parliamentarians on the legal affairs committee reached a compromise that would drastically reduce the number of companies mandated to report using the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).

The omnibus must now return to Parliament for a proper “plenary” vote before can go to the final trilogue negotiation. That means there is a small window for a fresh look at the deal.

Andreas Rasche, Copenhagen Business School prof, says: “A new deadline for amendments will be set, which could reopen parts of the compromise.”

Meanwhile, the US and Qatar have, as the Financial Times reports, issued “trade threats” to Brussels over the CSDDD which they describe as an “existential threat” to EU.

Both countries say the CSDDD would hurt their exports of liquefied natural gas to Europe, undermining the bloc’s energy security. Sustainability is not sustainable, in other words.

Hard to imagine how reporting rules do that but there you go, transparency and accountability is not top of everyone’s list of priorities.

Court in the act

In Geneva at the United Nations, efforts continue to formulate a binding treaty on business and human rights. Peggy Hicks, a director from the Office of the High Commissioner for Human Rights, had a warning for businesses everywhere.

Despite worries that work on ESG is being “rolled back” by regimes that remain nameless, Hicks said: “Courts around the world are increasingly holding companies to account over labour rights abuses, water and land pollution, adverse health impact and violation of the rights of communities.

“Courts are broadening the scope of corporate liability for human rights and environmental harm, mandatory due diligence is gaining traction, even amid political resistance, and victims are increasingly finding new pathways to hold companies accountable, particularly in transnational contexts.”

Comms call

In the UK, the Chartered Institute of Internal Auditors is worried that mention of the role of internal audit is missing from government statements on the Telecommunications Security Code, intended to tackle threats to comms networks.

Given this year’s cyber-attacks—when hundreds of millions were lost by M&S and Jaguar Land Rover as a result of criminals hacking their systems—forgetting internal audit’s role checking on tech safeguards seems like a glaring oversight.

Anne Kiem, chief executive of the Chartered IIA, says: “Telecommunications are the backbone of our digital economy and touch all of our daily lives. Yet too many telecoms providers operate without the independent assurance that internal audit brings to business-critical risks, despite increasing digital security threats.

“Ministers need to recognise the vital role of internal audit in supporting robust governance in the Telecommunications Security Code by setting a clear expectation for companies to obtain independent assurance.” That is surely the assurance we need.

Fine, a Li…

Finally, what’s in a name? Research from China indicates that it may be more than you think. A team of investigators looked at various reactions to boards having a “strong” surname culture—board members sharing the same name as the chair.

Turns out that where surname culture is strong, there is less earnings management. Likewise, it also correlates with better ESG performance.

The team writes: “Our findings reveal that surname culture functions as an informal governance mechanism that complements formal institutions and constrains managerial opportunism in China’s transitional economy.” Now there’s a useful tip for HR.