Governance Overview for both Board and Management, vol. 3
Board Director Recap – SagaciousThink Governance Insights
Governance is moving from form to substance: regulators, investors, and the public now care less about what’s written in the code and more about who sits in the chair, how they behave, and what data they rely on.
1. HSBC’s Chair Search Raises Succession-Planning Questions
What happened After a long and highly visible global search, HSBC has confirmed Brendan Nelson (76) as the permanent chair. Nelson was the interim chair and previously said he wasn’t looking for a full 6–9-year term. The process appeared somewhat chaotic, with high-profile external candidates considered and then passed over. Investors and commentators have questioned the bank’s succession planning and how this decision aligns with its Asia-focused strategy.
Why it matters
Chair and CEO succession are now reputational events, not just internal HR decisions.
Stakeholders expect a clear rationale for appointments (skills, geography, independence, diversity) – especially in global institutions with regional power centers.
A messy process can undermine confidence in a board’s long-term planning, bench strength, and self-assessment.
Questions to consider
Is our succession story (for chair, CEO, committee chairs) credible if it hit the front page tomorrow?
Do we have a skills and geography map of the board that links directly to our strategy?
How do we communicate when succession is interim, staged, or constrained by market realities?
Links to stories https://www.reuters.com/business/finance/hsbc-appoints-brendan-nelson-new-chairman-replace-mark-tucker-2025-12-03/ Reuters https://www.thetimes.com/business/companies-markets/article/hsbc-new-chairman-brendan-nelson-wwxrp0tsz The Times
2. Lloyd’s of London: Misconduct Probe Becomes a Governance Crisis
What happened At Lloyd’s of London, a governance review originally triggered by allegations about the former CEO’s relationship with a senior executive has broadened into a wider investigation into possible misconduct among senior staff. A top law firm has been asked to expand its review, and market participants are calling for transparency and publication of findings to restore trust. The Times
Why it matters
Culture, conduct, and workplace behavior have become core governance issues, not HR footnotes.
How an investigation is initiated, scoped, overseen, and communicated is seen as a test of board effectiveness and independence.
Different treatment of individuals (bonuses, exit terms, references) may create fairness and reputational risk if not clearly justified.
Questions to consider
Do we have a playbook for handling allegations involving top executives, including independent review triggers and reporting lines to the board?
How do we ensure that whistleblowing and speak-up mechanisms work in practice, especially against powerful individuals?
Are we prepared to publish enough about investigations and outcomes to maintain stakeholder trust?
Link to story https://www.thetimes.com/business/companies-markets/article/lloyds-of-london-misconduct-investigation-governance-xbbcmgnkr The Times
3. Governance Expectations Tighten for Large Private Companies (UK Wates Review)
What happened The UK Financial Reporting Council (FRC) has published its first detailed review of how large private companies report against the Wates Corporate Governance Principles. The FRC welcomes engagement but prioritizes more specific, outcomes-based disclosures on board decision‑making, stakeholder engagement, and long-term value, rather than boilerplate.
Why it matters
Governance scrutiny is no longer limited to listed companies; large private and family-controlled groups are now in the expanded scope.
Stakeholders, including lenders, employees, and regulators, want to see how the company’s governance works in practice, not just a statement that a code was adopted.
This UK trend may be the start of a trend around international expectations of private‑company transparency, especially for PE-backed and multinational groups.
Questions to consider
If we’re private (or have large private subsidiaries), how do we tell a coherent governance story externally?
Are our governance disclosures outcome-focused (what changed because of board oversight) or primarily procedural?
Do we use principles-based codes (like Wates or local equivalents) to inform board behavior, or just to meet filing requirements?
Link to story https://www.hsfkramer.com/notes/corporate/2025-posts/frc-review-of-corporate-reporting-by-large-companies Herbert Smith Freehills
4. Diversity and Activism: Momentum and Backlash
What happened
New research on the Silicon Valley 150 shows a sharp fall in board diversity disclosure, with only about 57% of companies providing such information this year versus over 90% previously, in part after U.S. court decisions striking down Nasdaq’s diversity rules. Wilson Sonsini
A Conference Board study finds women CEOs are about twice as likely to be targeted by shareholder activists as their male counterparts, even as overall activism remains robust, though slightly down from 2024 peaks. The Conference Board
Why it matters
Diversity and inclusion discussions enter a politicized phase: some companies are quietly reducing disclosure while investors still expect clarity. Osler, Hoskin & Harcourt LLP
The higher activist focus on women CEOs raises sensitive questions about bias, performance metrics, and board support for the leadership it appoints.
Boards may be caught between regulatory risk, political pressure, and investor expectations on DEI.
Questions to consider
Are we comfortable with our level of diversity disclosure relative to peer and investor expectations?
How do we ensure fair and bias-aware evaluations of the CEO and executive team, especially in activist situations?
Do we have a clear stance on DEI that we can defend to regulators, investors, employees, and the public?
Key links https://www.wsgr.com/en/insights/2025-silicon-valley-150-corporate-governance-report.html Wilson Sonsini https://www.conference-board.org/press/shareholder-activism-2025 The Conference Board
Bigger Governance Trends to Weave into the Board Narrative
Across these stories, several themes stand out:
From “soft” ESG to hard regulation, ESG ratings move from an unregulated influence on regulated infrastructure. That shifts accountability for data and disclosure firmly onto boards. Reuters
Succession and culture as strategic governance Chair/CEO transitions (HSBC) and culture crises (Lloyd’s) show that leadership pipelines and behavioral norms are now central to how markets judge governance quality. Reuters
Private companies in the governance spotlight Frameworks like the Wates Principles signal rising expectations that large private, PE‑backed, and family businesses demonstrate mature governance, not just listed entities. Herbert Smith Freehills
DEI and activism are entering a new, politicized phase The combination of reduced diversity disclosure and uneven activist pressure highlights the messier, more polarized landscape companies and their boards are navigating involving DEI, performance, and stakeholder trust. Wilson Sonsini
SME Leadership – Practical Readiness Lens
Same headlines, but through an SME operator lens.
A. Succession & Leadership: Not Just a Big‑Bank Problem
What it means for SMEs
If a giant like HSBC can be criticized for confusing chair succession, smaller businesses are even more exposed when leadership changes are ad hoc or founder-driven. Reuters
Customers, lenders, employees, and family shareholders all want to know: “Who’s really in charge next?”
Practical steps
Write down a basic succession map: who could step in if the CEO/founder is suddenly unavailable.
For family or founder-led firms, articulate what happens next generation – even if it’s just scenario options.
Build an informal advisory board or mentor circle that can step up in a crisis.
When leadership changes, communicate the why and the plan, not just the name.
B. Culture & Misconduct: Protecting a Smaller Brand
What it means for SMEs
A scandal at Lloyd’s shows how behavior at the top can quickly become a governance issue. In a smaller company, reputational damage can be fatal. The Times
Practical steps
Put three basics in place: a short Code of Conduct, a simple conflict‑of‑interest policy, and at least one speak‑up channel (even if it’s an external email or trusted adviser) – this cannot be a black hole.
Make clear that rules equally apply to founders, family, and senior leaders.
For any serious allegation, involve an independent adviser or lawyer early; don’t try to manage it purely inside the “leader or founders circle”.
Communicate outcomes in a way that protects privacy but shows you took it seriously.
C. Governance Expectations for Large Private & Growth SMEs
What it means for SMEs
The Wates review shows regulators want large private companies to explain how boards actually make decisions and manage stakeholders. Herbert Smith Freehills
Banks, PE firms, and strategic partners increasingly look for “public‑company-like” discipline in governance from growth businesses. (This is one of the reasons we work with companies preparing for IPO to have this sort of governance in place early)
Practical steps
Create a short Governance Overview document: who owns the business, who sits on the board/advisory board how big decisions are taken how you manage key risks
Refresh it yearly and ensure it aligns with your pitch decks and website.
Use a lightweight version of a code (like Wates or a local equivalent) as a checklist rather than a bureaucratic burden.
D. Diversity, Activism & “Micro‑Activists”
What it means for SMEs
The slowdown in diversity disclosure and activist focus on women CEOs shows DEI is becoming contentious and noisy, not less important. Wilson Sonsini
In SMEs, activism rarely comes from hedge funds; it comes from key employees, minority shareholders, vocal customers, or family members.
Practical steps
Be honest about where you are on diversity (leadership, board, pipeline) and where you realistically want to be.
Make promotion and performance criteria transparent, especially around top roles.
Give influential insiders (co-founders, key staff, minority investors) structured channels to raise concerns before they feel compelled to “go public.”
If you have a woman or underrepresented CEO, be explicit internally about how success is measured, and ensure the board supports this approach.
Key links https://www.wsgr.com/en/insights/2025-silicon-valley-150-corporate-governance-report.html Wilson Sonsini https://www.conference-board.org/press/shareholder-activism-2025 The Conference Board
You don’t need a 200‑page code to impress stakeholders. You need clear leadership plans, a no‑nonsense culture, honest ESG data, and a simple story you tell the same way to employees, customers, and lenders.