Executive Pay | Recent Trends In Evolution Of Boardroom Pay
Explore the latest developments in boardroom pay as demands intensify and listed companies compete with private capital for talent.
Headhunters joke that the responsibilities of UK board directors of yesteryear involved a round of golf, some boozy lunches and showing up for meetings to rubber-stamp decisions made by other people. This is certainly not the case today.
Over the past two decades, UK boardrooms have undergone professionalisation prompted by a series of reviews brought on by the dotcom bust, governance failures at companies such as Enron and the financial crisis. Today, serving on a publicly listed company board involves more legal and reputational risk, with directors often the target of activists, investors and the press. The workload is also greater. So why has pay for non-executive directors not kept up?
As boards set executive remuneration, directors “worry about optics and legitimacy” when debating their own pay, says Hans-Christophe Hirt, an adjunct professor at IMD business school. But given the demands now placed on directors, he says the level and structure of board pay should be on the agenda in the UK. The gap with the US is striking. According to the 2025 Spencer Stuart Board Index, average total pay for S&P 500 directors rose 3 per cent from 2024 to $336,352, with equity a central component. In the UK, the average non-executive base fee stands at £80,888, almost always paid out in cash.
Headhunters say female directors can earn significantly less than male counterparts. Despite the prestige and status that comes with a board seat at a listed company, one director told me he opted for a single FTSE board position as “an act of public service”. Instead, private equity directorships provide an income while keeping him out of the spotlight. City grandees argue director pay is linked to the revival of UK capital markets. Attracting the best board members is crucial to improving the country’s competitiveness. There is also a growing debate about whether foreign directors should receive different fees.
Board members say that the time commitment is wildly underestimated. The job includes preparation for and attendance at board meetings, travel time, site visits, informal sessions with management, investor engagement, building useful networks and skills, all while staying abreast of new risks. Responsibilities, such as being on the audit committee, take up more time.
A new report by executive search firm Korn Ferry found 95 per cent of UK NEDs surveyed say fees don’t reflect time commitment or skills required. “Governance and regulatory compliance is ever-increasing, and there has also been a significant increase in the complexity of doing business,” the authors add. Pippa Begg, the chief executive of board technology and advisory firm Board Intelligence, says for the most active directors “the risk-to-reward calculation often doesn’t make financial sense”. Public sympathy is often thin, however, and arguments for higher pay fall flat when it seems that directors so often are asleep at the wheel. Anyone familiar with recent turbulence at Diageo, HSBC or BP might question whether boards are earning their keep. Directors themselves deride the “lightweights” among their peers and executives often question the expertise of their overseers. Even so, companies now have higher standards for boardroom appointments and look to secure certain skills or profiles.
Boards are also undoubtedly more hands-on — intervening sooner with strategy shifts or executive exits. When boards work well, they act as true partners of management teams on strategy, culture and long-term value creation. Recommended News in-depthCorporate governance Who would be a FTSE 100 chair? Last month, the Institute of Directors said remuneration should better correspond with the demands of the role. It even suggested shares or share options to attract required skill sets and experience, particularly for smaller companies. Equity remains controversial in the UK. Critics argue that having “skin in the game” means you’re less likely to be independent or to blow the whistle if things go awry. The counter-argument would be that better alignment with management only sharpens oversight. And it is not as if conflicts are absent — just look at the consulting arrangements some NEDs establish alongside their board roles to generate income. It’s no surprise, then, that the UK’s Financial Reporting Council is considering amending the rules on equity awards.
As governance demands intensify and listed companies compete for talent with private capital, pay needs to be re-evaluated. These are no longer symbolic roles and implying that they are is self-defeating. Read More.
Board Independence | Market Regulator Plans Joint Venture With Corporates To Boost Independent Director Framework
The proposed initiative, still taking shape, will bring together industry, academic institutions and professional bodies to expand both the supply and capabilities of independent directors.
India’s market regulator is working on a collaborative framework with corporates, academia and professional bodies to expand the pipeline and effectiveness of independent directors, even as recent boardroom tensions at HDFC Bank sharpen scrutiny on governance standards.
“Sebi will seek to embark on a joint initiative for capacity building of independent directors at scale with a view to further improve corporate governance,” Sebi chief Tuhin Kanta Pandey said at the 19th Governance Summit hosted by the Confederation of Indian industries (CII) on Monday.
“Boards are well constituted, but not always equally effective. Information is available but not always interrogated deeply. Independence exists in form, but may not always translate into an independent perspective,” he added.
The proposed initiative, still taking shape, will bring together industry, academic institutions and professional bodies to expand both the supply and capabilities of independent directors.
Pandey said the goal is no longer formal compliance but depth and effectiveness.
The push comes at a time when boardroom dynamics are under scrutiny following the abrupt resignation of Atanu Chakraborty as non-executive chairman and independent director of HDFC Bank. Chakraborty stepped down in March citing “certain happenings and practices” that were not aligned with his personal values and ethics, triggering questions about how dissent is expressed and recorded within boards.
The Sebi chairman, following the regulator’s board meeting in March, said it was important for independent directors to elaborate on their concerns, if any, in company board meetings rather than leaving their positions ambiguous.
Chakraborty, who joined the bank’s board in 2021 and oversaw its merger with HDFC Ltd, later indicated that the alleged mis-selling of Credit Suisse’s perpetual bonds may have been a point of disagreement with management.
While he refrained from divulging detailed boardroom discussions, the episode renewed the debate over how effectively independent directors can challenge management decisions in complex, high-stakes environments.
Pandey said building capacity was crucial for improving this framework.
“Capacity building cannot be mandated in a prescriptive manner. But it can certainly be encouraged, enabled and supported through collaboration between regulators, industry bodies, professional bodies and academic business institutions,” he said. Read More.
Board Composition | How To Turn Individual Talent Into Organizational Excellence
Building elite performance is about design. Leaders who treat excellence as a design problem focus less on motivation and more on the conditions that shape behavior every day.
At the start of 2026, the CEO of a financial services firm sent a firmwide email that included a clip of NBA star Stephen Curry taking an almost full-court shot. The ball drops cleanly through the net. The crowd erupts. The email read:
Lots of things have to line up to achieve world-class performance. Some people would call this [shot] lucky.
And for sure there is some luck involved. However, the bigger driver was likely the endless hours Steph spent practicing in the gym…for years. No one thought he could play elite-level high school ball…absolutely not the NBA…and the idea of becoming the best shooter of all time?
We can’t control the market, the industry, or politics. But we can control the effort and focus we bring to work every single day.
Ask high achievers how they did it and many will point to sacrifice, discipline, and God-given talent. This explanation isn’t wrong, but it is incomplete.
Steph Curry trained inside systems that relentlessly improved skills and learning. His talent was stretched through competition. Coaches and colleagues demanded excellence. Team routines made learning unavoidable.
What looks like individual brilliance is usually the visible output of an invisible system.
Based on our combined experience of more than 50 years advising CEOs and senior teams, leading large teams within world-class organizations, and conducting research into elite organizations, we’ve found that the same is true in organizations. Leaders often talk about excellence as if it were a matter of talent, remuneration, or culture. When results vary, they diagnose individuals rather than the conditions under which they work. The system itself is rarely treated as the primary cause of variability, and so a familiar playbook is used: Upgrade the talent, refresh incentives, launch a culture initiative.
Many CEOs invest heavily in culture and talent but lack a coherent model that connects them to how execution actually occurs and performance is achieved.
We’ve found that organizations that sustain high performance over time treat excellence as a design problem. They build systems that make learning, collaboration, and the highly disciplined pursuit of excellence part of everyday work. These places are talent exporters, places where the best people go to benefit from a flywheel of excellence.
Three Elements That Shape Performance
These systems are most visible in domains where performance depends directly on how effectively organizations unlock and focus human capability. Here, results depend on highly technical skills, outcomes are transparent, and the cost of failure is high. This includes specialist or top-tier fields within finance, medicine, technology, the performing arts, special forces and, as we’ve seen, sports.
When we look closely at what is common across these systems, we see three elements engineered to work in close conjunction to accelerate and reinforce elite performance:
- Talent: What A-players experience and how they learn the craft.
- Team: How teams operate, including holding each other to account.
- Routine: How critical moments of work are structured, reviewed, and repeated.
In aviation, for example, talent is flight training, team is cockpit coordination, and routine is the disciplined use of checklists. In organizations that sustain elite performance, these three elements are deliberately woven together and operate as one system. Like gears in a transmission, they reinforce one another, making high performance part of how things get done day-to-day.
Talent: Development Happens in the Work
Many organizations treat talent as a skills and pipeline problem. It’s common to hear executives describe their development approach as primarily event- or label-driven. In these places, attribution bias is rife as people are categorized and moved through episodic, often generic, programs. It’s as though talented people are periodically removed from a dirty fishtank for polishing, only to be returned to the same water.
Elite organizations do the opposite: They design work systematically so that capability is constantly being built. Development is not episodic, but a byproduct of how work is designed, reviewed, and experienced.
They do this by deliberately increasing individuals’ exposure to decisions or issues two to three levels above their formal role. Senior leaders act as teachers in the course of the work; this expectation is enforced through role expectations and time allocation. Leaders gain status from developing others, ensuring apprenticeship is systematic rather than dependent on personality. Programs and labels still exist, but they play a different role. Excellence becomes an output of the system.
In these environments:
- Juniors are trusted with responsibility before they feel ready, with exposure determined by their appetite, energy, and leaders’ judgment. Feedback is frequent, specific, and tied to real decisions.
- Senior people see teaching as a core expectation of leadership.
Team: Standards are Enforced Socially
Organizational performance is fundamentally social. Teams pursuing elite performance push one another to improve in visible ways, creating peer accountability through shared language, feedback, and norms. In many such settings, peer expectations outweigh hierarchy.
Leaders shape standards by intervening in how teams work: who challenges whom, how decisions are made, and how mistakes are handled. They reinforce clarity of expectations, foster psychological safety, and impose visible consequences when standards are breached.
In weak systems, teams inherit the preferences and fears of their individual leaders, whereas in strong systems, they inherit shared standards and a collective commitment to improvement. In these environments:
- Each person takes responsibility for the team, speaking up and providing feedback to uphold explicit and rising standards.
- Discussions around quality, behavior, and results are collective, candid, and curious.
- Team norms outweigh individual leaders’ preferences. How the team works matters more than who leads it.
Routine: The Moments That Matter Do the Teaching
Elite-performing organizations identify a small number of high-stakes moments where standards are taught and reinforced. These include reviews, hand-offs, client meetings, and critical decisions. Shared standards are deliberately embedded in these moments. Design choices include what good looks like, who participates, what data is reviewed, how dialogue occurs, and what happens after meetings. These routines are social and disciplined. They teach standards by making them unavoidable. Over time, these routines become signature moves. People know what good looks like because they experience it repeatedly.
In weaker systems, routines are viewed as standard operating procedure or bureaucracy, rather than as vital social interactions that shape and define standards. In these environments:
- People uphold and obsess over a small number of critical moments that have disproportionate weight to the organization.
- The moments are social and outcome-focused; people attend to what they’re delivering and how.
- Outcomes are reviewed against shared standards with lessons applied in the next cycle.
- Discipline and appetite for excellence are reinforced as people work together.
The System Matters More Than Any Single Element
None of these elements works in isolation. Each affects the other. The key is to design interventions with the system in mind. In practice, this means leaders stop asking “How do we improve talent?” and start asking “How do we design for excellence?” For example, tightening talent without routine can produce smarter people repeating bad habits. Tightening routine without team produces compliance without generating local engagement. Strong systems don’t make everyone succeed; they make standards explicit, feedback fast, and consequences clear.
What It Takes to Change a System
Creating an elite system is a collective leadership task. Leaders create excellence by designing the system: how talent is stretched, how teams enforce standards, and how routines govern real work. Leaders are not the heroes of elite organizations. They’re the architects of systems that teach excellence continuously and outlast the performance of any individual.
In organizations that do this well, distinct roles tend to emerge:
- The CEO owns the system. Effective CEOs frame talent, excellence, and performance as interconnected design issues rather than people problems. They treat the performance system as a shared organizational asset and resist separating talent, culture, and execution along structural lines. They show up personally in moments where performance is reviewed, challenged, and learned from.
- Business unit leaders translate intent into standards. Business unit leaders shape how work is reviewed, how peers challenge one another, and whether learning happens in teams during the flow of work. They act as teachers and coaches, ensuring that teams operate against shared standards.
- The CHRO ensures coherence with the system. The CHRO’s leverage lies in aligning roles, progression, and visibility so that line leaders own development as part of the operating system. When HR operates outside the organization’s core ways of working, talent strategy risks becoming decorative and distracting.
A Case in Point: A Professional-Services Firm
Consider a leading professional-services firm one of us (Todd) advised. The firm had top-tier talent and elite clients, but uneven performance. On the surface, the firm looked successful. Digging deeper revealed a system that was working, but not well:
- Talent: Development depended almost entirely on which partner you worked for. Some partners taught actively and stretched people, whereas others left juniors to figure things out. There were no shared standards for apprenticeship, no systematic coaching, and little consistent feedback. Programs existed for top talent, but they were disconnected from work, and leaders did little to expose talent to increasingly complex problems. Capable juniors often left for environments that would make them better.
- Team: Some teams held each other to high standards. Others defaulted to individualism or were dominated by a single assertive partner. Functional teams were pulled in multiple directions by partner-specific requests, driving poor morale and bloated workflows. Peer standards lagged because deference to egoistic partners shaped daily behavior, and people sought approval from leaders instead of committing to owning excellence locally.
- Routine: The firm relied on rainmakers and had weak cross-selling. Business units lacked alignment, and the largely internal board was reactive to the most vocal partners. Key client moments (preparation, hand-offs, debriefs) were highly variable. Routines didn’t connect talent development or team standards into a single operating approach.
Rather than launching new programs, the firm redesigned how work actually happened:
- Partners’ unspoken social norms were unearthed through a diagnostic and called out during a two-day forum to create shared ownership and attention to the fundamental challenges that impeded elite performance. (Team)
- Board governance standards and composition were reset to shift attention from short-term reactivity to sustained leadership of the performance system. (Team and Routine)
- Business unit planning was designed to be shared discussions, enabling a disciplined forum for confronting performance drivers, variability across teams, and the shared ways of working required to raise standards. Teams of leaders emerged from these sessions with a shared sense of critical priorities and the ownership required to enable them in their local offices. (Team and Routine)
- Senior partners began coaching during the work week, turning live client issues into apprenticeship moments. (Talent and Routine)
- Partner-led office meetings were used to surface and reinforce shared expectations and create opportunities for partners to address, collectively, their shared aspirations, explicitly tightening Team and Routine. (Team and Routine)
- Leader-led “excellence” sessions within functions created peer accountability around functional priorities and client quality, shifting functional teams from passive recipients of partner demands to active carriers of standards. (Talent and Team)
These changes didn’t instantly create an elite organization, but they did change the direction of travel. Leaders attributed subsequent improvements in execution, engagement, and commercial outcomes, including more complex client wins and higher retention of top performers, to these changes.
The lesson is not that this firm copied best practices. It’s that it redesigned how talent, teams, and routines interacted for their specific context.
Why This Works: The Mundanity of Excellence
In 1989, sociologist Dan Chambliss studied Olympic swimmers expecting to find breakthrough techniques or heroic moments. What he found instead was mundane consistency: slightly better starts, cleaner turns, and relentless attention to basics, reinforced every day. Excellence, he concluded, is not dramatic, but systemic.
The same is true in organizations. Sustained elite performance is rarely the result of brilliance or luck. It’s the outcome of systems that persistently make people better. Elite organizations sustain excellence when talent, team, and routines are interwoven into a system that embeds standards and compounds learning over time.
Sustained performance is not about individual brilliance. Yes, hiring and rewards matter for performance, but leaders who want sustained elite performance should ask different questions about talent:
- What is our system teaching people every day?
- Where standards are enforced socially?
- Which routines actually shape learning, behavior, and performance?
Building elite performance is about design. Leaders who treat excellence as a design problem focus less on motivation and more on the conditions that shape behavior every day. They create leverage by shaping how talent, teams, and routines work together. Read More.
Environmental, Social and Governance | How To Fix ESG Ratings And Strong Sustainability
A deep dive into the disconnect between corporate ESG performance and rating agency scores and the actionable steps companies can take to close the gap.
In today’s financial landscape, Environmental, Social, and Governance (ESG) ratings have moved beyond a niche concern for sustainability teams to a core strategic priority for boards and executives. These ratings influence everything from cost of capital to investor relations, regulatory compliance, and even consumer trust. Yet, despite significant investments in sustainability, many companies find their ESG ratings fail to reflect their actual progress. The issue isn’t a lack of effort—it’s a fundamental misalignment between how companies report their ESG initiatives and how rating agencies evaluate them.
This disconnect carries real financial consequences. Lower-than-expected ESG ratings can limit access to sustainable financing, exclude companies from ESG-focused indices, and even erode investor confidence. The problem isn’t that companies aren’t doing enough; it’s that what they are doing isn’t always visible to the algorithms and analysts that determine their scores.
The Root of the Problem: A Mismatch in Priorities
ESG rating agencies—such as MSCI, Sustainalytics, S&P Global, and LSEG/Refinitiv—operate with precise, but often opaque methodologies. Their models prioritize structured, quantifiable data over broader sustainability narratives. A company might have a world-class carbon reduction program, but if its disclosures lack the specific data, metrics or formatting that agencies require, that progress may go unrecognized.
Three Key Challenges:
- Granular Data Requirements
Rating agencies don’t just want to know if a company is addressing climate risk—they want to see detailed breakdowns of Scope 1, 2, and 3 emissions, intensity-normalized figures, and third-party verification flags. A high-level commitment to “net-zero by 2050” won’t suffice if the underlying data isn’t presented in the exact way the agency’s model expects.
- Thematic Reporting vs. Data-Driven Scoring
Many ESG reporting platforms and frameworks (such as GRI or SASB) encourage companies to discuss material risks and long-term strategies. While valuable for stakeholders, these narratives often don’t align with the data-field-level analysis that drives ratings. For example, a company might emphasize its supply chain ethics in a sustainability report, but if it doesn’t disclose supplier audit rates or human rights due diligence processes in the format required by MSCI or Sustainalytics, that effort won’t contribute to its score.
- Limited Transparency in Scoring
Unlike financial audits, ESG ratings provide little clarity on how scores are calculated. Companies receive a final rating but rarely a detailed breakdown of which disclosures were prioritized, credited, overlooked, or penalized. Without this feedback loop, even well-intentioned firms struggle to make targeted improvements.
The Consequences of the Gap
The implications of this misalignment extend far beyond reputation. ESG ratings are increasingly tied to financial outcomes:
- Cost of Capital: Banks and investors use ESG scores to determine loan margins, bond pricing, and investment eligibility. A lower score can translate to higher financing costs.
- Index Inclusion: Funds tracking ESG indices (e.g., MSCI ESG Leaders, FTSE4Good) automatically exclude or underweight companies with weaker ratings, limiting access to a growing pool of ESG-focused capital.
- Regulatory and Stakeholder Pressure: As frameworks like the EU’s Corporate Sustainability Reporting Directive (CSRD) come into effect, companies face mounting pressure to demonstrate not just ESG activity, but measurable, comparable progress.
- For example, a European manufacturer with a strong track record on emissions reduction might assume its efforts will be reflected in its Sustainalytics score—only to find that missing a single data point (e.g., a breakdown of Scope 3 Category 11 emissions) results in a lower-than-expected rating. The result? Higher borrowing costs and exclusion from ESG funds, despite real-world progress.
Bridging the Gap: A Data-Driven Approach
The solution lies in strategic disclosure optimization—a process that ensures ESG reporting aligns with the exact requirements of rating agencies. This doesn’t require companies to change their sustainability strategies, but rather to present their existing efforts in a way that rating algorithms can recognize and reward.
Step-by-Step Optimization:
- Audit Existing Disclosures Against Agency Criteria
Begin by comparing current ESG reports with the specific data fields and formats used by MSCI, Sustainalytics, and other key raters. Identify gaps where disclosures are missing, incomplete, or misaligned. For instance, if an agency requires board diversity metrics to be reported by gender andethnicity, but a company only discloses gender, that’s an easy fix with outsized impact.
- Restructure Data for Machine Readability
Rating agencies increasingly rely on automated systems to process disclosures. Companies that present data in standardized, machine-readable formats (e.g., XBRL for ESG) are more likely to receive full credit. This might mean reorganizing a sustainability report to highlight key metrics upfront or tagging data to match agency taxonomies.
- Simulate Score Improvements Before Submission
Advanced tools, like the ESG.AI Score Navigator, help to close the gap, companies must adopt a ‘reverse-engineered’ audit approach. This involves mapping internal sustainability data directly against the specific, field-level requirements of major rating agencies before the reporting cycle begins. For example, a company can test whether adding a third-party assurance flag to its emissions data would lift its MSCI score—and by how much. This enables firms to prioritize high-impact adjustments before finalizing their reports.
- Focus on High-Value Metrics
Not all ESG factors are weighted equally. Carbon emissions, governance transparency, and supply chain data typically carry more influence than softer metrics. Companies should ensure these areas are fully disclosed, verified, and aligned with agency expectations.
- Engage Directly with Rating Agencies
While agencies guard their methodologies closely, many offer opportunities for companies to clarify disclosures or provide additional evidence. Proactively engaging with raters can help resolve ambiguities and ensure nothing is overlooked.
Case Study: From Overlooked to Optimized
Consider the case of a mid-cap industrial firm that had reduced its Scope 1 and 2 emissions by 30% over five years. Despite this achievement, its Sustainalytics score remained stagnant. A closer review revealed two issues:
- The company’s emissions data was reported in aggregate, without the category-level breakdowns Sustainalytics required.
- Its governance disclosures lacked a clear flag for third-party assurance, which the agency’s model penalized.
By restructuring its emissions data to include the missing breakdowns and explicitly noting its use of external auditors, the company saw its score improve by 1.5 points—enough to qualify for a sustainability-linked loan with a 10-basis-point margin reduction.
Similarly, a financial services firm discovered that its board diversity metrics were buried in a PDF appendix, rather than presented in the standardized table format preferred by MSCI. Moving this data to a prominent, machine-readable section of its report resulted in a 1-point score increase, directly enhancing its appeal to ESG-focused investors.
The Broader Shift: From Compliance to Competitive Advantage
Optimizing ESG disclosures IS about assuring real sustainability is recognized. It’s about ensuring that real sustainability progress is accurately reflected in the metrics that matter to markets. For forward-thinking companies, this represents an opportunity to :
- Unlock Lower Costs of Capital: Higher ESG ratings correlate with better financing terms, as banks and investors reward transparency and performance.
- Attract ESG-Focused Investment: Funds with ESG mandates now manage over $40 trillion in assets globally. Companies with strong, well-communicated ESG performance are better positioned to access this capital.
- Enhance Reputation and Trust: Transparent, aligned disclosures reduce perceived risk and signal commitment to stakeholders—from regulators to customers.
As one CFO put it: “We spent years reducing our environmental footprint, but our ratings didn’t reflect that. Once we aligned our disclosures with what the agencies were actually measuring, our scores improved—and so did our access to capital.”
The Regulatory and Market Context
This shift comes at a critical juncture. Regulators in the EU, U.S., and Asia are tightening ESG disclosure rules, while rating agencies face scrutiny over their methodologies. Companies that proactively align their reporting with both regulatory requirements and rating agency expectations will be best positioned to navigate this evolving landscape.
In Europe, the CSRD now requires detailed, audited ESG disclosures—many of which overlap with the data points that rating agencies prioritize. Companies that treat ESG reporting as a strategic exercise, rather than a compliance checkbox, will gain a competitive edge.
The Bottom Line
ESG ratings are no longer just a measure of sustainability—they’re a financial and strategic asset. Companies that take a data-driven approach to their disclosures can bridge the gap between performance and perception, turning their ESG efforts into a source of competitive advantage.
The message is clear: It’s not enough to do the work. You have to make sure it’s seen.
About the Author
Kelly Kirsch is Director General of ESG.AI’s European headquarters in Paris, where he leads regional strategy for the fintech platform behind the ESG.AI ESG Score Navigator, a solution designed to optimize ESG ratings performance. He holds an ALM in Sustainability from Harvard University, as well as an MBA and Master of Finance from Hult International Business School. Kelly brings a strong background in global finance, having worked with Bank of America, HSBC, and JPMorgan Chase, and has contributed to sustainability initiatives at Pomellato, part of the Kering Group. In addition to his industry work, he is an active academic contributor and speaker, having served as a guest lecturer at ESSCA, ESCP’s Excellence Propulsion Program, and Harvard Extension School’s Sustainable Finance course, and regularly speaks at leading events including the Baltic Sustainability Awards, Le Forum d’Engagement, and the Audencia AI Festival. Read More.
Corporate Governance Trends | Driving The Board Agenda In 2026: How Leaders Should Prepare
Boards heading into 2026 must operate in an environment unlike any that most leaders have previously encountered, according to a report by KPMG.
A convergence of economic uncertainty, rapid technological disruption, heightened cybersecurity threats and intensifying sustainability pressures continues to reshape boardroom priorities worldwide.
According to the report, few business leaders have faced the scale and complexity of risks confronting companies today.
Economic fragility, recession risk, rising costs of capital, accelerating advances in AI, escalating cyber threats, climate severity and persistent policy gridlock combine to create a volatile backdrop for decision-making.
In response, stakeholders increasingly expect boards to provide greater transparency and disclosure, particularly around how they oversee strategy and risk. KPMG emphasises that pressure on boards and management teams will intensify.
Reassessing the board’s role in strategy
KPMG says that the unprecedented mix of uncertainty, volatility and risk requires deeper and more active board engagement in strategy.
Directors must focus more intently on scenario planning, agility, crisis readiness and organisational resilience.
Shifting geopolitical dynamics, including policy positions on trade, tariffs, immigration, taxation and regulation, continue to reshape the global economic and risk landscape, alongside legal challenges to government actions.
At the same time, ongoing military conflicts, the move away from global convergence toward fragmentation and rising risks of recession, inflation and domestic polarisation add layers of complexity.
In this environment, the report notes that boards must play a more proactive role in strategy by adopting forward-looking governance practices. Leaders should help management develop a vivid picture of possible future scenarios, even when transformational change makes prediction difficult.
KPMG encourages boards to dedicate time to focused and urgent “what-if” discussions, placing AI, human capital and supply chains at the centre of strategic debate.
Scenario planning also remains essential. The report advises boards to ensure that management properly resources these processes, uses high-quality data, considers a wide range of external perspectives and revisits scenarios regularly.
Boards should also integrate risk management, crisis planning and resilience into strategic discussions. Because no strategy can anticipate every disruption, directors must help management reassess risks continuously and understand their implications for strategy and capital allocation.
KPMG also urges boards to strike a careful balance between short-term responsiveness and long-term vision. While agility matters in uncertain conditions, boards must guard against short-termism and keep their focus on sustainable value creation and organisational endurance.
Sustaining a healthy board-CEO relationship
A strong board-CEO relationship remains central to effective governance. KPMG describes the need for “healthy tension” in the boardroom, where directors and leaders advise and challenge management while maintaining independence and objectivity.
Heightened pressure on boards and CEOs makes this balance harder to achieve but more important than ever.
Based on its discussions with directors, KPMG identifies three priorities:
- Boards must insist on candour and transparency to build trust and confidence. CEOs set the tone for management with the board, and both sides should expect no surprises.
- Boards should clearly communicate that their role extends beyond compliance to ongoing strategic engagement and support.
- Boards must maintain a robust and evolving CEO succession planning process to reduce disruption risk and ensure leadership readiness.
Strengthening risk oversight
KPMG stresses that growing risk complexity requires a holistic approach to risk oversight. Investors, regulators, rating agencies and other stakeholders expect boards to explain how they oversee risks related to climate, cybersecurity, AI, human capital, consumer trends and sustainability.
Boards should regularly assess the effectiveness of enterprise risk management processes and maintain a shared view of critical risks with management.
KPMG also advises boards to clearly define risk oversight responsibilities across committees, identify overlaps and establish structures that promote coordination and information sharing.
The report concludes that delivering the 2026 board agenda will present a significant oversight challenge.
Boards will need strong leadership, the right mix of skills and experience, effective committee structures, continuous director education and rigorous evaluations to meet the demands of a volatile and fast-changing world. Read More.



