Confidence in multinational enterprises has dropped by 21% since 2021, reflecting growing skepticism toward global institutions. Businesses now operate amid deteriorating legal frameworks, fragmented regulations, and incentives favoring immediate gains over sustainable progress. Strong governance practices offer a pathway to rebuild credibility and ensure long-term viability. A 2025 study highlights this erosion of trust, emphasizing the need for companies to clearly demonstrate enduring value, ethical conduct, and legitimacy in their operations. In an era of political volatility, organizational resilience hinges on transparent and accountable leadership. However, it remains unclear whether corporate boards fully understand these dynamics or possess the tools to respond effectively. Although sustainability disclosures have become more common, their impact on accountability and stakeholder confidence varies, particularly where regulatory resistance exists.
Nerissa Naidu, Chair of the Board at CreditXpert and member of the World Economic Forum’s Global Future Council on Good Governance, noted that firms are increasingly caught between commercial decisions and societal debates, complicating efforts to maintain mutual trust with stakeholders. She stressed that inconsistent engagement strategies and reactive crisis responses weaken institutional robustness. Other experts on the council have explored ways to strengthen corporate resilience through trust-centered governance models.
Three major challenges stand out in today’s governance landscape:
First, the weakening of legal systems in various regions undermines both public and private sector integrity. Issues such as institutional corruption, politically influenced enforcement, and fragile judiciaries damage confidence in governance structures. Delia Ferreira Rubio, former head of Transparency International, warned that when the rule of law is compromised, uncertainty grows and foundational principles of sound governance are threatened. Companies must therefore reinforce their social legitimacy through responsible practices.
Second, misaligned incentives continue to distort decision-making. Performance metrics tied to short cycles—such as quarterly earnings, executive tenures averaging five to seven years, or political mandates lasting two to six years—discourage long-term planning. Eugene Soltes, Professor at Harvard Business School, pointed out that these timeframes lead organizations to undervalue future risks and opportunities. Michèle Sutter from the University of St. Gallen added that compensation models often reward immediate financial results rather than enduring stability.
Third, regulatory complexity is escalating. The expanding web of national and international rules creates overlapping requirements and compliance burdens. Small and medium-sized enterprises (SMEs) face particular difficulties due to limited resources, data-intensive due diligence demands, and inconsistent interpretations across jurisdictions. Anahita Thoms of Baker McKenzie observed that over 40% of large firms lack visibility into indirect suppliers, while SMEs struggle even more to meet expectations. Katharina Weghmann from EY highlighted how conflicting regulations across markets can force companies into compliance dilemmas, where adherence in one region may breach stakeholder expectations elsewhere—turning legal compliance into a reputational risk. Boards face mounting pressure to oversee these complexities effectively.
Despite these obstacles, there is potential to reshape governance frameworks. Shifting from checklist-based reporting to outcome-focused models can enhance resilience and value creation. Maira Martini, CEO of Transparency International, argued that ethical leadership and strong governance can guide organizations through uncertainty. She suggested that current pauses in sustainability momentum could serve as strategic turning points to build durable, governance-backed business models.
Three transformative opportunities emerge:
One, redefining governance through a strategic lens that treats integrity as a competitive advantage. Rather than viewing oversight as restrictive, organizations can use it to foster innovation—especially in fast-evolving areas like artificial intelligence. Laetitia Cailleteau of Accenture emphasized that current corporate architectures are ill-equipped to manage AI responsibly. Effective oversight demands integration across business units, IT, data, risk, compliance, security, and environmental teams—functions that often operate in isolation. Without shared understanding and coordination, achieving AI readiness remains out of reach. Boards must adopt more proactive and informed supervision.
Two, implementing system-wide solutions that align incentives with long-term outcomes. Reward structures should reflect sustained stakeholder trust, workforce development, and responsible technological expansion. Insights can be drawn from family-owned firms focused on generational stewardship, institutional investors with multi-decade horizons, and academic institutions prioritizing societal contribution over quick returns. Governance models should establish time-bound responsibilities, linking performance evaluations and compensation to enduring impacts across different timeframes.
Three, advancing collaboration focused on measurable results. Research by the OECD indicates that 68% of sustainability metrics track internal policies rather than actual outcomes, leading to confusion and fragmented standards. Drawing from Ronald Cohen’s work in impact investing, the emphasis should shift from monitoring processes to rewarding tangible achievements—such as reduced emissions, equitable hiring, enhanced stakeholder confidence, and lasting economic value. The objective is not increased reporting volume but improved, verifiable impact. Forward-thinking organizations will deepen ties with employees and local communities, reinforcing their social operating license.
Ultimately, governance must evolve from isolated compliance tasks into a unified, results-driven framework. Success depends on internal cohesion—breaking down silos and aligning functions across risk management, compliance, crisis response, and oversight. An integrated assurance model connecting governance, risk, and control systems is essential for lasting effectiveness. Honorable Neema Lugangira, former Tanzanian Member of Parliament, urged that authentic stakeholder involvement go beyond formal requirements to include co-creation, equity, and shared benefits. Marginalized voices—including women, youth, and Indigenous communities—must be structurally included in governance processes.
The World Economic Forum’s Global Future Council on Good Governance is actively exploring these pathways, aiming to shape governance systems that are resilient, inclusive, and oriented toward long-term success.
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3 opportunities to strengthen good governance worldwide
Trust in multinational companies has declined 21% since 2021. n nCompanies today also face weakened rule of law, short-term incentives and regulatory fragmentation. n nGood governance can be a remedy for this – and it brings strategic advantages. n nTrust in global institutions, including multinational companies, is under increasing scrutiny. A 2025 report shows a 21% decline in confidence in business leaders since 2021. n nIn the febrile political environment prevailing in many countries, this highlights the importance for companies to actively demonstrate their long-term value creation, societal trust and operational legitimacy. n nResilient good governance can be a key enabler of integrity and trust in business. What remains uncertain is how well boards grasp this dynamic and whether they are equipped to address it effectively. n nWhile sustainability standards have gained prominence in corporate disclosure, their ability to drive genuine accountability, build trust and support resilient governance remains inconsistent, especially with pushback in some jurisdictions. n n“Companies have to walk a fine line between business decisions and cultural battles, making it harder to uphold a cohesive social contract with stakeholders,” said Nerissa Naidu, Chair of the Board at CreditXpert and a member of the World Economic Forum’s Global Future Council on Good Governance. n nShe added that the lack of consistent stakeholder engagement policies and reactive crisis management hurts resilience, as other council members shed light on how to build corporate resilience through trust-based good governance. n nLong-standing and new challenges must be tackled n nCorporate governance challenges in 2025 can be summed up in the following three ways: n n1. Weakening rule of law n nIn many jurisdictions, systemic corruption, politicized enforcement and weak legal institutions undermine governance, eroding trust in both governments and companies. This reinforces the need for businesses to build resilience by strengthening their social licence. n n“ The undermining of the rule of law generates uncertainty and a lack of trust, and threatens the basic principles of good governance,” said Delia Ferreira Rubio, former chair of Transparency International. n n2. Misaligned incentives and short-term reporting and decision-making n nGovernance and sustainability goals are undermined by short-term incentives that prioritize quarterly or tenure-linked metrics over long-term planning, while reporting frameworks fail to capture real-world impacts and lasting value. n n“Despite pledges of long-term vision, decision-making is trapped in short cycles – CEOs average 5-7 years, fund managers face quarterly reviews and politicians run on 2–6-year terms,” said Eugene Soltes, Professor of Business Administration at Harvard Business School. “These horizons create incentives that undervalue long-term risks and opportunities.” n nMichèle Sutter, Professor of Organizational Control and Governance at University of St. Gallen said: “Remuneration structures often misalign incentives, rewarding short-term gains over long-term stability.” n n3. Fragmentation and regulatory complexity n nThe rapidly expanding national and international regulatory landscape creates fragmentation, overlapping obligations and compliance fatigue. Companies, especially small- and medium-sized enterprises (SMEs), struggle with data-heavy due diligence, high costs and inconsistent interpretations, exemplified by tensions between the German Supply Chain Act and the EU’s Corporate Due Diligence Directive. n n“Over 40% of large firms lack visibility on indirect suppliers, while SMEs, with fewer resources, struggle even more to meet due diligence demands,” said Anahita Thoms, partner and head of international trade, and chair of the advisory board at law firm Baker McKenzie. n nKatharina Weghmann, global leader at EY’s Centre of Excellence for Ethics and Business Responsibility said: “Companies navigate impossible mazes of conflicting requirements across jurisdictions. Legal compliance in one market can violate stakeholder expectations in another, making regulatory arbitrage a reputational liability. n n“Boards have a tough time navigating this and making sure to provide sufficient oversight on executive decisions.” n nCorporate governance as a results driver n nBy recognizing these challenges, there lies an opportunity to recalibrate corporate governance models, shifting from reporting-heavy box-ticking to approaches that genuinely reinforce resilience and long-term value creation. n n“Corporate governance and a culture of ethics and integrity can provide strategic direction and orientations in times of uncertainty. The current sustainability ‘halt’ can be used as a strategic inflection point to future-proof sustainable business models for real based on good governance,” said Maira Martini, chief executive officer at Transparency International. n nThese opportunities include: n n1. Reimagining corporate governance through a business case lens for integrity n nReimagining corporate governance allows organizations to shift from mere compliance to leveraging trust, transparency and anti-corruption as competitive advantages, especially in fast-moving sectors, such as technology and emerging fields, such as AI, where frameworks are still evolving. n nFar from stifling change, well-designed governance can be agile, cross-functional and a catalyst for innovation. n n“Corporate structures are not yet built to govern AI effectively,” said Laetitia Cailleteau, managing director and EMEA responsible AI lead at Accenture. n n“Effective AI governance requires integration across business, IT, data, risk, compliance, security and environmental functions – areas that too often remain siloed with little shared language or fluency. Without this, an ‘AI-ready’ enterprise is out of reach. Boards, too, must step up with more proactive, informed oversight,” Cailleteau said. n nTogether, these developments present momentum for designing governance not as a static rulebook but as a strategic enabler of innovation, legitimacy and long-term value creation. n n2. Adopting practical, system-wide solutions n nTo strengthen governance, incentive structures must evolve to reward long-term outcomes such as sustained trust with stakeholders, investments in human capital or the responsible scaling of technology. n nThere are lessons to be drawn from family-owned businesses, which often prioritize generational stewardship over quarterly results: from institutional investors, whose fiduciary duty spans decades rather than years and from academia, where knowledge creation and societal contribution outweigh immediate returns. n nGovernance structures must define temporal responsibilities, tying commitments and compensation to long-term outcomes while considering the impacts across various time horizons. n n3. Delivering outcomes-oriented collaboration and impact n nAn OECD study found that 68% of all sustainability metrics measure company policies and activities rather than outcomes, resulting in a diversity of standards and confusion. n nDrawing on impact investor Ronald Cohen’s work, the focus must shift from measuring processes to rewarding tangible results – from improved environmental performance and inclusive hiring to stakeholder trust and long-term value creation. The goal is not more reporting but better outcomes that are visible, verifiable and valued. n nFinally, the far-sighted will work ever more closely with their own workers and communities in which they operate, thereby strengthening their social operating license. n nBeyond compliance to co-creation n nTogether, these steps can transform governance from a fragmented exercise into a coherent, outcome-driven system. The importance of an effective internal organization driving this change cannot be overemphasized for good governance mechanisms to flourish. Too often, the respective activities and resources in companies are siloed and lack horizontal alignment, which is crucial for governance and risk management purposes. n nAn integrated assurance approach, linking corporate governance, risk and crisis management, compliance and controls, is needed to make the good governance efforts truly effective and impactful over time. n nHonourable Neema Lugangira, former Tanzania Member of Parliament, said: “True stakeholder engagement must go beyond compliance and toward co-creation, equity and shared value. Community voices – especially women, youth and Indigenous peoples – must be structurally embedded in governance.” n nThe World Economic Forum’s Global Future Council on Good Governance is actively working on these opportunities, with a focus on shaping the future of governance that is resilient, inclusive and long-term oriented.