Corporate Governance in the “New Normal” Business Environment

by Stephen Barth & Joshua Agen, for Corporate Compliance Insights, February 2, 2010.

I. Introduction

In the wake of the financial crisis of 2008-09, some observers believe that our traditional market-based, capitalistic, macro-economic business environment may be entering a new era, dubbed the “new normal,”[1] in which economic, political and surrounding influences and circumstances will not return to their pre-crisis norms.

These observers predict that this “new normal” business environment may entail, among other things:

  • slower or no domestic economic growth;
  • higher levels of government involvement in private business through increased regulation, taxation and direct intervention;
  • a relatively weak dollar;
  • long-term inflation risk; and
  • overall increased business risk aversion.[2]

Some also forecast that private sector unemployment will continue at relatively high levels and that commodity prices will continue to rise. This “new normal” business environment is also likely to include the continued growth of corporate globalization (especially involving emerging market countries) and an increased emphasis on environmental sustainability practices by corporations.

Corporate governance practices may play an important role in determining how successfully companies may be able to adapt to this “new normal” business environment. This article discusses some of the corporate governance issues that boards of directors may confront in addressing the risks and opportunities arising out of this “new normal.”…(continue reading)

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