Why is corporate governance important?

Transparency begins with the quality of reporting — both internal and external.

High-quality internal reporting creates a solid foundation for impactful external reporting. Boards that demand clear, concise, and decision-ready information rather than dense, retrospective packs create an environment where issues are surfaced early and decisions are made with clarity. Board Intelligence champions this through the QDI Principle, which helps directors and management ask better questions and get to the heart of what matters.

External reporting builds on this – for example, through annual reports, regulatory filings, and investor updates. Done well, these documents offer more than just data points. They tell the story of how decisions are made and how value is created, sharing timely, relevant, and accessible updates that balance progress and challenges, focus on what matters, and distil complex topics in straightforward language. High-quality external reporting not only meets regulatory demands but also strengthens credibility, deepens relationships, and signals a genuine commitment to long-term value creation.

Pro tip: Learn more about the five most common board pack challenges, and how to fix them.

Accountability is strengthened when directors don’t just monitor performance but also reflect on their own impact. Regular board evaluations, both internal and external, are opportunities to learn, adapt, and raise the bar. In many countries, companies are required to disclose certain details about their board evaluations.

Pro tip: Read our research into FTSE 100 board review disclosures for insights into board evaluation trends.

Finally, trust is earned through consistency and openness. When boards are visible stewards of purpose, show integrity in decision-making, and balance challenge with support, they earn the confidence of stakeholders inside and outside the organisation. Tools like secure board portals and frameworks that encourage better conversations, better questions, and better decisions are key to making this a reality.

According to McKinsey's 2025 GRC survey, excellent governance, risk, and compliance functions are common aspirations, but corporate leaders see a need for improvement across numerous aspects of all three GRC pillars. Some of the reasons for GRC shortfalls are limited technology enablement, insufficient resourcing of oversight capabilities, and the challenges of a shifting regulatory landscape.

Better governance equips organisations to anticipate risk rather than react to it. When boards have structured oversight, access to timely, decision-ready information, and clear accountability lines, blind spots will shrink.

Technology plays a key role in digitising board processes, centralising information, and flagging emerging risks in real time. So too does resourcing; strong governance depends on capable committees, skilled risk functions, and clear ownership of compliance across the company.

Here are the key ways organisations can reduce risk and improve compliance:

• Establish appropriate C-level representation with direct board access to create an adequate "voice of risk" at the executive level.
• Stay ahead of evolving regulations through regular policy reviews.
• Embrace activities such as horizon scanning, scenario-based analysis, and stress testing to support organisational processes.
• Comprehensive coverage, including formal procedures, regular board assessments, and systematic documentation, to close governance gaps.
• Tie compensation directly to risk-based approaches and compliance success to create stronger incentives for balanced risk/return behaviours and see that GRC considerations are prioritised.

Good corporate governance underpins long-term business sustainability by ensuring that the board performs its “steering” role effectively. This means looking beyond short-term results to shape strategy, allocate resources, and manage emerging risks in line with the organisation’s purpose and values.

The five pillars of board effectiveness — which, together, enable boards to perform this role — are:  

1. Individuals: diverse, skilled directors who are led well by the chair.
2. Infrastructure: robust policies and processes and efficient board operations.
3. Information: timely and accurate sources of insight that support robust decision-making.
4. Impact: the board’s ability to drive momentum and enable agility.
5. Innovation: supporting an innovation culture.

When these pillars are in place, the board can:

• Add value in alignment with the organisation’s priorities and goals and use its time and skills productively.
• Manage risk effectively, and anticipate and respond to systemic risks (climate, regulation, talent) before they materially impact the organisation.
• Direct capital toward sustainable growth.
• Safeguard the organisation’s license to operate by embedding an ethical culture and building stakeholder trust.
• Attract investment.
• Encourage experimentation and innovation that sustains the organisation’s competitive advantage.

Board Intelligence provides AI-powered tools and advisory services that help boards work at their best, including:

• Board management software for streamlined governance processes and board collaborate.
• AI-powered reporting tools that deliver insight and drive better board decision-making.
• Performance assessment tools and services to identify improvement opportunities.
• Board advisory services that help boards clarify their purpose and priorities and improve their performance.
• Board development programs that help directors lead with purpose, insight, and foresight.

ESG integration means systematically and explicitly incorporating environmental, social, and governance (ESG) factors into every strategic, operational, and investment decision the company makes. The aim is to improve risk-adjusted returns and long-term value creation.

This is not a separate sustainability initiative; instead, it embeds ESG considerations into the normal workflows of finance, risk, compliance, supply chain, HR, and board oversight.

Research shows that companies with strong ESG perform better, and investments in companies with good ESG performance have generally yielded higher returns than the average within their broader market.

It makes sense. When done right, ESG lowers the cost of capital, reduces downside risk, and opens new growth markets while keeping the company ahead of tightening disclosure rules. A key factor here is clear, consistent reporting on ESG metrics and practices.

The McKinsey 2025 study reveals a clear gap between intent and action regarding technology and AI in governance. While many organisations acknowledge the need to improve their IT and GRC systems, few have fully embraced the tools already available.

Our research into directors’ concerns about tech literacy in the boardroom shows that most are only using a small fraction of the capabilities offered by existing platforms. Our poll of nearly 300 directors showed that 83% think their board and management team aren’t set up to take advantage of the AI opportunity.

However, technology (and increasingly, AI) has become essential to strengthening governance in a complex and fast-moving environment. The opportunity is clear: digitise and automate routine controls and processes, and use data to support sharper, faster decision-making.

Based on McKinsey’s research as well as our AI deep-dive webinar, we see a world where AI will strengthen corporate governance in the following ways:

1. AI-driven tools embedded in your board portal platform, such as Insight Driver, can support directors with board meeting preparation — flagging blind spots in analysis and recommendations and spotting gaps or bias.
2. AI transforms how governance professionals serve the board with tools like Minute Writer and Agenda Planner.
3. Smart AI-based tools can automate control testing, enhance policy compliance guidance, and provide more interactive training on risk.
4. AI can be used to generate reports that are easier for directors to engage with and which enable more robust decisions.
5. Board management software providers are embedding AI into trusted, configurable features designed for board and governance use cases.

Exciting as these features are, AI cannot yet be trusted to exercise the careful judgment expected of directors. But it can smooth some of the more burdensome aspects of the director’s role — tackling information overload, for example — and help directors bring their best game to board discussions.

As McKinsey states: “We are convinced that only a combination of human expertise and smart technologies in GRC will enable companies to tackle the increasingly demanding regulatory and risk environment.”

Pro tip: Read the definitive guide to AI for the board pack for insights into how AI can improve board reporting.

It starts at the top. Boards and executive teams set the tone for what is acceptable through their decisions, the behaviours they reward, and the questions they ask. Ethical leadership is about policies as well as consistent, visible standards that shape how people act when no one is watching.

To assist your oversight of culture and conduct, employ tools like Board Intelligence’s Agenda Planner, which helps you analyse the topics your board is spending its time on and the stakeholders it’s talking about. AI-powered tools like Lucia and Insight Driver encourage impactful, forward-looking oversight that goes beyond compliance. Board evaluations can also help — with board survey tools providing high-quality data about board performance and conduct and facilitated reviews enabling growth-oriented deep-dives.

Clear accountability, strong conflict-of-interest protocols, and open channels for raising concerns are essential. So too is regular board-level scrutiny of culture and conduct, not as a box-ticking exercise but as a core part of organisational performance. A culture of integrity is not declared, it is demonstrated.

Robust governance lowers capital costs, improves operational and financial resilience, and helps attract talent and customers. It creates a self-reinforcing advantage that competitors without good governance will struggle to replicate.

Strategic corporate governance unlocks:

• Better decisions: Diverse, engaged boards explore issues from more angles and are more likely to surface original ideas that challenge the status quo.
  
• Stronger culture: A climate of challenge, trust, and open debate makes full use of directors’ expertise.
  
• Sharper focus: Clear mandates keep the board aligned on what matters most.

When boards actively shape strategy, drive innovation, and promote organisational agility, they transform governance from a cost centre into a strategic asset — and create a source of enduring competitive advantage.