On the Horizon

As 2021 draws to a close and a new year begins, I am struck by several realisations. First, 2021, like 2020, has been a year dominated by change. We are now two years on from the start of the COVID-19 pandemic, but it continues to have a huge impact on people’s lives. We are also one year on from the UK’s exit from the European Union and the initial consequences of that have been increasingly felt as the year has gone on.

Second, I am conscious of how the environment in which governance professionals operate is evolving at pace. Just taking the UK as an example, there are plans to reform the audit market, Companies House, the National Health Service, further education and football, not to mention the race to Net Zero that promises to be a major game changer for legacy industries and those developing low-carbon technologies.

Third, I am struck by the extraordinary amount of work governance professionals put into helping organisations globally to navigate this evolving landscape. One only needs to look at the winners of the Institute’s 2021 Awards to see how our members and others in the governance community bring their specialist knowledge to bear, making a genuine difference to how organisations respond to the world around them.

The Institute has played its part too, advising government and regulators on how to manage governance issues and publishing its review into the effectiveness of board evaluation in the UK listed sector. The Institute has issued guidance about crucial matters, such as how to hold an AGM in the 2021 AGM season. This is a challenge that resonates globally and the issue was covered at the 10th Annual Directors and Company Secretaries Conference arranged by our Uganda branch in June. Our Ghana branch will also be discussing how to overcome the challenges of hybrid AGMs in January.

We have produced guidance on how to change academy trust articles of association, various pieces of guidance for the charity sector and led a survey of charity trustees in the UK and Republic of Ireland which demonstrated that there is a considerable desire for there to be clearer and simpler guidance about reporting.

We have campaigned hard on matters of interest to ProShare members, raising awareness of the value of employee share plans, and were heavily involved in the review of the Code for Sports Governance. We have also been involved in a major piece of work with Professor Andrew Likierman at the London Business School on the 12 elements of independent judgement for a UK board, and another with the Centre for Synchronous Leadership that documents new findings on effective governance for a post-pandemic world. The latter shows that those organisations which were unprepared for the pandemic have fundamentally changed the way that they prioritise more holistic issues such as organisational culture, their impact on wider society, climate change and diversity and inclusion.

The desire to implement change is being driven at the highest levels and across all sectors. The UK Government published proposals to reform the UK audit market and improve corporate governance in March and the Institute’s high standing with

Government meant that we were able to facilitate member engagement with Lord Callanan, Minister for Climate Change and Corporate Responsibility, to present our views on the consultation. We have made it abundantly clear that concerns on the role of audit, the degree of professional scepticism exercised by auditors and the lack of trust in the ability of auditors outside the Big Four all need to be addressed for reforms to have any chance of genuine success.

Our Policy team is also involved in work with the Financial Reporting Council on the future of the AGM and is part of a working group led by the UK’s Department of Business, Energy and Industrial Strategy to implement changes at Companies House. In addition, the Institute is working with the UK Department for Education (DfE) on the future of governance in education bodies.

The DfE introduced a white paper on the future of the further education sector in January 2021, the ultimate aim being to drive up England’s workforce skills, opportunities and productivity. The Skills and Post-16 Education Bill places employers in a partnership role in designing and developing qualifications and training to meet the aspirations of the current and future workforce, as well as the needs of local and national employers. These proposals will require deft and proportionate governance arrangements to support their success.

Similarly, changes are also afoot in the charity sector, with a Charities Bill introduced in May that seeks to implement recommendations from the Law Commission’s 2017 Technical Issues in Charity Law Report. The Bill will simplify a number of processes to improve the efficiency of the sector, including making it easier for charities to amend governing documents, dispose of land or carry out mergers. The aim is to save charities time and money, notably legal costs. The measures also seek to remove or reform unnecessary or overly bureaucratic regulatory processes.

Likewise, the UK’s Health and Care Bill seeks to move the National Health Service to an Integrated Care Systems model with the aim of encouraging greater collaboration, better sharing of data, the reduction of bureaucracy to promote innovation and improved public accountability. The governance of multi-agency partnership working is undoubtedly something that will be of interest to members working in the sector.

In the world of sports governance, Sport England and UK Sport published the revised Code for Sports Governance in July. The Institute was part of the Project Board for the review that saw several novel changes, including a move away from specified targets for diversity, which will be replaced with the requirement to complete and publish annual diversity and inclusion action plans. There is also a requirement to consider the impact of decisions and actions on stakeholders, the environment and wider society, as well as one for organisations to appoint a director to take a lead on welfare and safety. In addition, organisations are being asked to promote good governance throughout their wider operations – ‘cascading’ good governance as it were.

In January 2021, Sport England launched its 10-year ‘Uniting the Movement’ strategy. This included a commitment to encourage and support ‘continuous improvement in governance, driving towards more diverse and inclusive practices’ and this is reflected in the partnership it has been building with the Institute since 2020 when we established the Sports Governance Academy (SGA). This partnership is attracting global attention, with sports organisations beyond the UK approaching the SGA for advice. UK Sport also launched its own 10-year strategic plan in May.

In June, Sport England, sportscotland, Sport Wales, Sport Northern Ireland and UK Sport published the findings of their race in sport review. This found that racism and race inequalities still exist, are longstanding issues and have resulted in ethnically diverse communities being consistently disadvantaged. The example of Yorkshire County Cricket Club is a reminder of the detrimental impact on individuals and a culture of mistrust and exclusion.

Outside the UK, our overseas branch network has focussed on issues of regional and global importance, including sustainable finance, ESG and climate risk reporting. Our Guernsey annual conference in September, around the theme of ‘Creating a sustainable future’, looked at the evolution of international regulatory governance, dynamics in the virtual boardroom and cyber risk governance amongst other things. Our Ireland conference in May covered such issues as increased accountability for directors, digital transformation, tax and accounting and diversity and inclusion. In Uganda members considered how a new paradigm for public service might be built and the importance of strategic leadership during a crisis. Supply chain problems, inflation, the Isle of Man Equality Act and virtual recruitment were all topics for our Isle of Man branch while our Barbados, Jamaica and Trinidad & Tobago branches joined forces in September to bring members an event looking at ‘Good corporate governance health in the Caribbean’.

Looking ahead to what is to come, the key development for 2022 for the publicly funded sports sector will be the implementation of the revised Code for Sports Governance. Key areas of challenge will be around diversity, ESG and the cascading of good governance throughout an organisational structure (possibly including organisations a funded body works with). Safeguarding and culture will also remain hot topics and the findings from a review into allegations in gymnastics which will be published in due course will undoubtedly highlight learnings for the sector. A key development that may attract the attention of millions of fans in professional sport will be the repercussions of the fan-led review of football governance which reported in November, its recommendations including an independent regulator for the game and a shadow board of elected supporter representatives at each club.

ESG, climate change, the appointment of a new Charity Commission chair and the subsequent impact that this will have on the tone taken by the sector are all issues that the charity sector will face, along with the post-COVID recovery and the planned introduction of a new Charities SORP in 2024. The audit regime changes that are currently facing the corporate world might also have an impact on the charity sector.

The huge range of changes that the governance community is facing means that we will use the results of our first stakeholder audit into attitudes to governance to find the best ways to support our broad stakeholder base. Careers in governance will be at the centre of our activities and actions to drive inclusivity. We have plans in place to establish alternative routes to entry and to refresh our Competency Framework, underpinned by a strong understanding of the needs of our members and the wider governance community. With so much on the horizon, 2022 promises to be another busy year, with much for governance professionals to get their teeth into.

Sara Drake is CEO of the chartered governance institute