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The Next Normal for Private Company Governance

The pandemic is forcing private companies and their boards to think about what the next normal may look like for corporate governance in the months and years ahead.

Deloitte Private

By Jason Downing, Vice Chairman and US Deloitte Private Leader

At Deloitte, we're seeing several trends emerging across private company governance. While company stakeholders are clamoring for a sense of certainty and clarity from executive leadership, those same stakeholders are increasingly looking for a corporate purpose—beyond revenue generation—that drives private company strategy and vision.

As businesses move from responding to the pandemic to recovery, we believe these trends are going to manifest in different ways over the next several months.

Evolving dynamic between corporate boards and leadership.

According to a recent Deloitte survey, 77 percent of private company executives reported increased communications and meetings with their boards since the onset of the pandemic. Over the next several months, private company boards may continue to shift toward more engagement with executive leadership, such as providing additional guidance to company c-suites and participating in more two-way discussions regarding company strategy and performance.

The workforce: once a long-term priority, now an immediate focus.

While talent has long been a priority for boards, private company leaders will need to continue evolving how they manage their workforces for the foreseeable future. In order to successfully recover and thrive, companies will need to build trust with stakeholders, demonstrate a commitment to personal safety, and provide employee reassurance and support. This means private company leaders must have tailored plans and processes to ensure a safe work environment.

Along with addressing the physical workplace, companies also will have to accelerate their digital transformation plans in the months ahead. By some estimates, a significant portion of the workforce may not return to their traditional office environment anytime soon—if ever. If private company leaders can prioritize these technology and workforce investments now, they could be setting themselves up for success in the next normal that will emerge over the coming months.

"ESG' as a risk mitigator and value enhancer.

Stakeholder expectations regarding private company purpose will also have increasing influence on corporate governance moving forward. According to Morningstar research, 70 percent of responsible investment equity funds outperformed their conventional peers in Q1 2020—a trend that may incentivize investors to increasingly look at corporate responsibility as a significant investment criteria. Additionally, a recent Deloitte Private poll revealed that nearly 70 percent of private company executives believe their companies should increase their focus on environmental, social, and governance (ESG) factors in the wake of the pandemic.

Having a clear corporate purpose that extends beyond profit is becoming more of a necessity in this new landscape. And for private companies that means establishing not just a vision, but a governance structure that enables clear goals to be set and executed against with sufficient oversight. It's not enough to articulate a plan—stakeholders need to have confidence in executive leadership's ability to provide value for the company and society at large.

The road ahead.

There's still much that can impact these trends for private companies over the next several months—particularly as they determine how to reopen the workplace. However, the changes we're seeing in private company governance right now may provide a multitude of benefits to businesses in the years ahead. Executive leaders might consider incorporating these trends into their planning to smooth their companies' transition into the next normal that's fast emerging.

For additional insight on business recovery and workforce strategies, click here.

Deloitte Private

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