We’re in a new governance era

We’re in a new governance era: increased regulation is being replaced by a race for competitiveness. It might look good on the surface, but there are things to think about. 

When it comes to corporate governance, the pendulum has swung away from heavier rulebooks and increased pressure from lawmakers. 

For the last twenty years, and especially since the Great Recession, governance, compliance and oversight were about more regulation: tougher codes, stricter rules, bigger penalties and higher risk. That era is shifting with the political mood. Now, lawmakers are showing a higher degree of urgency than before, as they try to ensure their jurisdictions remain competitive in a more polarised world.

The logic is simple: if regulation feels too heavy or gets a lot of pushback, companies will move or hold off on investment. Combine that with a new world order marked by higher competition between traditional allies and the breakdown of old international promises to work together on economic issues. 

The result is that when businesses are unhappy with the rules they have to follow, it’s now a lot more crucial that regulators listen. To safeguard their competitiveness, countries and states are rethinking how far they can push businesses on compliance. That means looking at fundamentals like:

• Director liability—how far personal responsibility stretches if a scandal breaks. 
• Shareholder rights—particularly their privileges to examine sensitive corporate information and hold directors and executives to account. 
• Governance standards—the ever-evolving rulebooks governing how directors should operate. 
• Reporting requirements—the changing landscape of what companies need to report, how often, and how detailed. 

This new era means that loosening requirements in any of these areas goes a long way to increase the reputation of “being a good place to do business”

This phenomenon looks different depending on where you are in the world: politics and corporate culture matter. A place like the US – historically more laissez-faire and depending on court rulings for standards – will be different to a place like the EU – with more state intervention, alternating governance structures and other political priorities. 

With all this in mind, here are three examples of the new era in action on the ground:

For decades, Delaware was the poster child for corporate incorporation in the United States. In recent years, shifting moods in state court decisions – perceived to disadvantage directors – made states like Nevada and Texas more popular. Some high-profile names like Tesla have already left Delaware because of this, prompting debate over a potential “DExit”. 

There’s no urgent indication that DExit is wide-reaching or final, as the “Brexit” that inspired its name. In fact, numbers show that a very healthy number of companies remain in Delaware. Nevertheless, the state has passed Senate Bill 21 (SB 21) to give legal backing to many court decisions through the years and reassure directors. However, shareholder representatives criticised it as a “billionaires’ bill”.  

The message was clear: stay here, and we’ll make the ground more stable beneath your feet.

After several high-profile corporate failures, UK lawmakers promised a tougher corporate governance code. In January 2024, it was announced that the reforms had been watered down significantly.

Competitiveness certainly played a part: Britain couldn’t risk scaring away firms post-Brexit and with severe economic troubles. 

Of course, the UK did have an election in mid-2024, and the new Labour government promised, in principle, to stick to stricter laws. However, little has come of these promises since, indicating that the status quo of “watering down rules for competitiveness’ sake” is here to stay.

Europe’s landmark Corporate Sustainability Reporting Directive (CSRD) was hailed as a revolution in ESG transparency. But industry pushback quickly followed. It was too broad, too complex, and firms simply didn’t have the capacity to comply with the proposed deadlines. 

Again, officials came out with a watered-down proposal, reducing the scope, delaying the deadlines, and reducing the reporting requirements. As with the UK, competitiveness has been cited as a crucial reason why this watering down was necessary. The EU’s attempt to lead on ESG disclosure is still historic—but it’s also a reminder of how strong ambition can be cut short in this new era of governance.

For directors, his trend will carry a lot of good news. Watered-down requirements mean less pressure, fewer demands, and less personal risk. In most cases, that’s absolutely accurate. There are just two essential points to bear in mind:

• Watered-down standards or new laws don’t detract from the baseline governance requirements that, over time, have escalated significantly. There remains a lot on the shoulders of directors, and being adequately prepared is the only way to mitigate that risk. 
• There’s no clear indication as to where the balance between regulation and competitiveness will eventually settle, both within individual countries and across borders. This creates difficulty in long-term risk planning and decision-making, because you don’t know what you’ll need to do to comply with the rulebooks, say, five years from now. 

The authentic takeaway is that this new era demands vigilance. Directors must treat uncertainty itself as a risk factor, even if the regulatory culture is shifting into a pro-director mindset. High standards are still the norm, enforcement remains fierce, and reputation damage moves faster than any reform cycle.