Top of the agenda

Cyber security, environmental and social issues, shareholder activism – corporate governance has never been so high up the business agenda as it is today. And the role GCs play in ensuring proper systems of checks and balances are in place and adhered to at their companies cannot be underestimated. Against a backdrop of continued economic uncertainty, soaring inflation pushing up the costs of doing business and new pressure on workforce management post pandemic, IHL spoke to some of the leading private practice partners in London, as identified by sibling title The Legal 500, about the issues likely to be at the top of the GC agenda in 2022.

The Green agenda

According to Baker McKenzie’s Helen Bradley, who heads the global firm’s London corporate finance practice and chairs the global capital markets group, the ‘E’ of ESG is going to be one of the biggest issues facing general counsel. ‘It’s the first year of mandatory reporting on a comply or explain basis with the Taskforce on Climate-Related Financial Disclosures (TCFD) under the Listing Rules,’ she says. ‘So, companies will be grappling with that and particularly with their transition plans to net zero.’

But it isn’t just the TCFD that listed companies need to focus on, according to Bradley, who draws attention to the Greening Finance roadmap to sustainable investment, noting the need for companies to take a longer-term look at their business and the targets they set to avoid being caught out in future.

‘The government is looking at disclosure to help companies put climate at the heart of their business; to run their business in a way which makes money but that is also sustainable and done in a green way. This year, the government is consulting on various new disclosure regimes. It’s quite difficult for companies, the temptation is to get a quick win and write something really positive – who wants to write something potentially negative? But you need to think about how this plays out going forward when interacting with stakeholders – increasingly companies are being held to account. You will have seen some companies in the press recently where they’ve been criticised for putting a metric out, which on further scrutiny, is just a feel-good metric. A more holistic survey would have shown that the metric focused on is a tiny fraction of the overall picture; and that actually the company’s not getting anywhere near as good results as were suggested or hasn’t put climate at the heart of its DNA.’

Alexandra Beidas, global head of employment and incentives at Linklaters, also notes the centrality of climate change as a governance issue. ‘We’re now seeing ESG everywhere. There is an expectation for all listed companies to be focused on it. And indeed, any company that wants to obtain finance. And consumers and other stakeholders are focused on it. It doesn’t matter what sector you’re in.’ She believes that the current trend for corporates to use remuneration to ensure ESG targets are met is proof in point of the corporate commitment here.

Diversity and inclusion

Increasing diversity at board level may have been on the agenda for years but disclosure around diversity and inclusion isn’t going away. Says Beidas: ‘There’s been focus on women on boards, and now the UK government has just come out with a five-year plan, to see more women leaders. It wants to see talent coming up into senior management. And then the FCA is coming out with rules this year on having more standardised reporting around diversity, which will help compare how companies are doing in this area. It will all continue to encourage companies to put in place policies that mean they are getting diverse talent coming through and moving up the organisation, which is really important.’

On this subject, Bradley advises that businesses need to consult within the groups they want to hire from, in order to better understand their challenges. ‘Then you have to structure your hiring process to make sure that you factor these things in and to make sure you have a much fairer and broader process to attract the best talent.’

Recruitment is only the first step though, with corporates also needing to make sure they retain that talent. ‘You need to have programmes in place specifically for retention,’ says Bradley. ‘You’ve got to stop assuming that everyone is the same as you because maybe they aren’t. Maybe they’ve just got different challenges to you. If you don’t consult with the relevant groups to better understand that, you’re going about it with a hand tied behind your back.’

The risk of over-regulation

Brexit may now be done and dusted but the UK’s position in the global economy is not yet secure and, according to some partners, the flip side of the increased regulation around ESG may be a risk to the UK’s desirability as a destination for overseas investment. James Palmer, corporate partner and former senior partner at Herbert Smith Freehills, argues that a divide at government level between regulation and deregulation poses risk to business. ‘Frankly, at today’s date, with the current prime minister, he is a big intervenor. And that is happening all around the world. We’re seeing government intervention. I’m not a libertarian who believes that the world should never be interfered with – society expects politicians to legislate interference – but the extent of interference, the lack of predictability and the lack of really clear goals for vast swathes of political interference, not just in the UK, is a challenge.’

Bradley expands on his point further, pointing out the threat it could raise for the UK as a destination for investment. ‘How attractive is the UK as an investment destination for overseas capital? There’s a lot of commentary in the market on this, and there has been for some time. You see the tension between wanting London to be an attractive destination for capital and listings – “do we need to relax the regime in some respects to make it easier to list?” and the UK leading, in some respects, some of the disclosures around climate and diversity.’


Inflation isn’t just affecting the cost of living, Palmer predicts it is also going to become a major issue for businesses and their GCs, as they are confronted with the onslaught of rising inflation and interest rates pushing up the cost of borrowing, the cost of wages and the cost of doing business generally.

‘I remember growing up in the 70s with rampant inflation, and I remember having a mortgage with rampant inflation but over the last 15 years we’ve not had that as a dynamic, so we’ve got a generation that’s not used to that. We’ve got used, post-financial crisis, to very low interest rates, artificially distorted interest rates, but I think anybody who’s not assuming that interest rates and inflation could both be materially higher [for many years] is missing a trick.

‘This is about a three-, five-, ten-year response. I don’t think wage rises, cost rises and food price rises are for one year. If you take the banking sector as just one example, this has significant implications because that whole model turns on what the inflation and what the interest rate is.’

Shift in mindset

Whether it’s an ESG response or a workforce management issue, the key to a company’s corporate governance success will be how it responds to the challenges. Palmer argues that there will be no single correct approach. Discussing what good governance looks like, he concludes: ‘The good news is that over the last couple of years, boards and their chief risk and legal advisers have got pretty accustomed to developing a method of dealing with change. Different organisations will have completely different structures, but it is about everybody contributing proportionately. Good governance is all about having the right inputs, the right considerations. Not zoning people out because they make assumptions you don’t agree with or they come at it from a different perspective.

‘Sometimes people think governance is inherently an outcome but I think governance is designed to lead to better outcomes. The reality is that governance for a GC is about what the legal function is going to do, what the organisation is going to do and how they’re going to guide the organisation.’