Governance Overview for both Board and Management, vol. 6
A look at the latest governance topics from across the globe, and potential implications for both boards and leadership teams.
SECTION I — BOARD DIRECTORS LENS
United States (US)
Topic: AI and Board Oversight
Story: Reports show a continued shift of AI from a technical issue to a core board oversight and fiduciary responsibility. Boards are increasingly disclosing AI risk and oversight structures in proxy filings, with S&P 500 companies reporting higher levels of AI board accountability year after year.
Why it Matters: AI oversight has become a mainstream board agenda item, not just an IT risk discussion - a trend that continues to shape risk governance and strategic oversight in 2026 and beyond as companies grapple with its rapid development, coupled with their own maturity around adoption.
Link: OnBoardMeetings
Europe / UK
Topic: Executive Compensation & Regulatory Transparency
Story: Fidelity International, with management of over $1 trillion, warned UK company chairs against excessive executive pay and urged stronger compensation governance tied to performance, highlighting investor activism from large asset managers.
Why it Matters: UK governance norms around compensation may face pressure from institutional investors to align pay with performance and long-term value, especially as UK listing rule changes evolve.
Link: FT.com
Topic: Shareholder Transparency Rollback
Story: The UK government discontinued a public shareholder revolt register tracking votes against executive pay controversies, drawing criticism for reducing visibility into shareholder dissent.
Why it Matters: Transparency mechanisms are critical governance tools; their removal could reduce public accountability over executive compensation and weaken investor voice.
Link: The Guardian
Asia Pacific (Australia)
Topic: Board Governance & Executive Alignment - DroneShield
Story: DroneShield, a defense tech company, introduced mandatory minimum shareholding policies for directors and executives after a controversial $70m leadership share sales eroded investor confidence. The board also plans increased independence and remuneration framework reviews. Why it Matters: Governance resets following market trust issues highlight how quickly board credibility can erode, and how alignment mechanisms (compulsory MSP for directors and executives, independence) are now governance imperatives.
Links: Investing.com and TipRanks
Global / Cross-Regional Trends
Topic: Corporate Governance Trends Shaping 2026
Trends: Boards must elevate governance beyond compliance, embedding AI oversight, ESG, board composition, cybersecurity, and strategic risk alignment into routine governance frameworks.
Why it Matters: Governance is rapidly evolving, both technologically and culturally, requiring boards to shift to more strategic, data-informed decision frameworks.
SECTION II — SME LEADERSHIP LENS
1. AI Governance & Emerging Technology
Primary Regions: US | EU/UK | Asia (global spillover)
What’s Happening
Boards are rapidly elevating AI oversight as a governance issue, with increasing expectations that leadership can explain where AI is used, who approves it, and how risks are controlled.
Source (single reference): Harvard Law School Forum on Corporate Governance – Cyber and AI Oversight Disclosures: What Companies Shared in 2025
Why This Matters for SME Leaders
For SMEs, AI governance shows up first in:
Enterprise customer security questionnaires
Contract negotiations
Insurance renewals
Due diligence for funding or exit
AI risk is no longer theoretical - it is commercially tested.
Company Examples
OpenAI (US): A governance breakdown at the board level revealed unclear authority and escalation processes surrounding AI decisions, resulting in abrupt and disruptive leadership changes.
VC-backed SaaS firms: Lost or delayed deals due to the inability to clearly articulate AI governance controls.
What Good Looks Like in 2026
Clear inventory of AI tools and use cases
Defined ownership for AI decisions
Board visibility into higher-risk AI applications
Simple, defensible documentation for customers
What No Longer Works
Treating AI as “just an engineering decision.”
Relying solely on vendors for governance assurances
Waiting for customers to ask governance questions
Actions SME Leaders Should Take
Inventory all AI uses (internal and customer-facing)
Draft a 1 to 2-page AI governance brief
Proactively brief the board
Questions SME Leaders Should Ask Their Board
Which AI uses require board awareness or approval?
2. Executive Compensation & Alignment
Regions: EU/UK | US | Asia Pacific
What’s Happening
Institutional investors and boards are tightening scrutiny on pay-for-performance alignment. Governance failures around compensation are increasingly cited in litigation, activism, and diligence.
Why This Matters for SME Leaders
For SMEs, misaligned incentives lead to:
Margin erosion
Control failures
Cultural breakdowns
Reduced exit valuations
Compensation design is a governance lever as much as an HR decision. Link: FT.com
Company Examples
Tesla (US): Compensation invalidated due to governance process failures - reinforcing that how pay is approved matters.
PE-backed platform companies (composite): Buyers flagged incentive structures that rewarded growth without risk discipline.
What Good Looks Like in 2026
Incentives tied to value creation and risk
Clear documentation linking pay to strategy
Board engagement before issues surface
What Is No Longer Good
“Pay for growth at all costs.”
Informal or undocumented incentive decisions
Assuming compensation won’t be scrutinized until exit
Actions SME Leaders Should Take
Stress-test incentive plans against downside scenarios
Document rationale and trade-offs
Engage the board on any redesign
3. Cybersecurity & Operational Resilience
Regions: US | Asia | EU/UK
What’s Happening
Cyber risk is increasingly viewed as a governance and controls issue, not just IT. Regulators and insurers are focusing on leadership accountability.
Why This Matters for SME Leaders
Cyber incidents for SMEs often result in:
Lost customers
Insurance claim denials
Reputational damage
Board scrutiny after the fact
Boards expect management to anticipate, not just respond.
Company Examples
Wells Fargo (US): Long-running controls failures demonstrate how unresolved governance weaknesses compound over time.
Mid-market firms: Cyber incidents reveal unclear escalation and board reporting.
What Good Looks Like in 2026
Clear incident escalation paths
Board-level cyber reporting cadence
Regular tabletop exercises (including the board)
What Is No Longer Good
Treating cyber as purely technical
No defined “who decides” in a crisis
Board is briefed only after the incidents
Actions SME Leaders Should Take
Clarify escalation and decision authority
Conduct tabletop exercises
Align cyber reporting with board expectations
Questions SME Leaders Should Ask Their Board
When do you expect to be notified?
What decisions should include you?
4. ESG, Disclosure & Credibility
Regions: EU/UK | Global supply chains
What’s Happening
While some ESG regulations are easing, investor and customer expectations remain high. Credibility (not compliance) is the primary risk.
Why This Matters for SME Leaders
Overstated ESG claims create:
Reputational risk
Customer distrust
Legal exposure
SMEs are increasingly asked to prove ESG claims in deals and partnerships.
Company Examples
BP (EU/UK): Investor pressure intensified after changes to climate commitments.
Multiple SMEs: Lost deals due to unsupported sustainability claims.
What Good Looks Like in 2026
Modest, defensible ESG claims
Decision-useful metrics
Board awareness of ESG trade-offs
What Is No Longer Good
Marketing-driven ESG statements
Generic disclosures
No data to back claims
Actions SME Leaders Should Take
Build a one-page ESG fact sheet
Track a small number of credible metrics
Align claims with operations
5. Succession & Governance Readiness
Regions: Global (especially family-owned and founder-led)
What’s Happening
Succession failures remain one of the most common (and preventable) governance breakdowns.
Why This Matters for SME Leaders
Succession gaps lead to:
Operational disruption
Customer uncertainty
Financing and insurance concerns
Company Examples
· Family-owned enterprises (Asia / Middle East, composite): Founder incapacity exposed a lack of emergency planning.
What Good Looks Like in 2026
· Emergency and long-term succession plans
· Clear interim authority
· Board involvement in continuity planning
What Is No Longer Good
· “We’ll deal with it later.”
· Single-successor assumptions
· Informal authority structures
Actions SME Leaders Should Take
Document emergency scenarios
Clarify decision rights
Engage independent advisors if needed