Strong corporate governance is no longer just a regulatory expectation — it is a commercial necessity for businesses operating across borders. Investors, financial institutions, regulators, and counterparties increasingly scrutinize how companies are governed, not only at headquarters but throughout their global operations.
For multinationals, inconsistent governance practices across jurisdictions can expose the business to legal risk, damage its reputation, and undermine investor confidence. Conversely, a coherent, internationally aligned governance framework strengthens operational control, enhances market credibility, and protects directors and stakeholders alike.
In this article, we explore why governance matters internationally, how to manage governance across jurisdictions, and what practical steps multinationals can take to align legal requirements with commercial realities.
At its core, corporate governance refers to the structures, processes, and principles that guide how a company is controlled and directed. It shapes everything from decision-making authority to stakeholder accountability.
For multinationals, governance is not only about internal management — it directly affects how regulators, investors, lenders, and business partners perceive the company. Weak governance practices can delay regulatory approvals, deter investment, or undermine M&A negotiations.
In recent years, high-profile corporate failures — from Wirecard in Germany to Steinhoff in South Africa — have highlighted how governance breakdowns can transcend borders, eroding trust across global markets.
Moreover, regulators worldwide are tightening governance expectations, with particular focus on:
• Board independence and diversity
• ESG (Environmental, Social, and Governance) oversight
• Anti-corruption compliance
• Transparent reporting and stakeholder engagement
For multinationals, governance is not just about meeting legal minimums — it’s about protecting the business, managing cross-border risks, and meeting counterparties' expectations.
While legal frameworks differ across jurisdictions, several universal governance principles apply to companies operating internationally:
1. Accountability: Clear structures must define how decisions are made and who is responsible. This extends to foreign subsidiaries, joint ventures, and affiliated entities.
2. Transparency: Accurate, timely, and consistent reporting — both internally and to stakeholders — builds trust and reduces legal risk.
3. Integrity: Ethical conduct, compliance with laws, and responsible business practices must be embedded across all jurisdictions.
4. Board Effectiveness: The board must have the right mix of skills, experience, and independence to oversee complex, global operations.
5. Risk Management: Governance structures should enable effective identification, assessment, and mitigation of cross-border legal, financial, and operational risks.
Leading governance frameworks, such as the OECD Principles of Corporate Governance (2015) and the UK Corporate Governance Code, provide practical guidance that multinational boards can adapt to their global footprint.
For multinationals, the challenge lies in maintaining consistent governance while complying with local legal requirements in each jurisdiction.
• In some jurisdictions, local directors are mandatory (e.g., certain UAE Free Zones or Singapore companies under the Companies Act).
• Governance structures may differ — for example, Germany’s two-tier board system (Management Board and Supervisory Board) versus the unitary board common in the U.S.
• ESG and sustainability reporting obligations vary significantly — from the EU Corporate Sustainability Reporting Directive (CSRD) to voluntary frameworks elsewhere.
✔ Global Governance Framework: Establish group-wide governance policies that set minimum standards for decision-making, reporting, and risk management across all entities.
✔ Local Compliance Alignment: Adapt governance structures to meet jurisdiction-specific legal requirements while maintaining consistency with global standards.
✔ Regular Board Oversight: Ensure that the parent board maintains visibility over foreign subsidiaries, with clear reporting lines and escalation procedures.
✔ Training and Cultural Awareness: Directors and management should be trained to understand local governance expectations, legal duties, and cultural nuances.
✔ Use of Holding Companies and Shared Service Structures: Efficient use of holding structures in jurisdictions like the Netherlands or Luxembourg can simplify governance while providing tax and legal efficiencies — provided these entities comply with substance and transparency requirements.
Directors of multinational companies face heightened legal and commercial exposure. Duties owed at both parent and subsidiary levels often differ, and liability can extend across borders.
Key Considerations:
• Directors of foreign subsidiaries are subject to local company law. In jurisdictions like France or Germany, failure to meet director duties can result in civil and even criminal liability.
• Parent company directors must ensure adequate oversight of global operations to prevent breaches of anti-corruption laws (e.g., U.S. FCPA, UK Bribery Act), data protection regulations (GDPR), and sanctions regimes.
• In M&A transactions, governance failures — such as failure to integrate control structures post-acquisition — can expose directors to shareholder claims or regulatory penalties.
✔ Appoint qualified, informed directors in all jurisdictions.
✔ Provide clear reporting frameworks between subsidiaries and the parent.
✔ Conduct regular governance and compliance audits.
✔ Ensure Directors & Officers (D&O) insurance policies cover cross-border exposures.
✔ Seek legal advice on director liability before expanding into new jurisdictions or restructuring operations.
For multinational companies, corporate governance is no longer confined to boardrooms or compliance manuals. It is a strategic asset that protects the business, enhances operational efficiency, and builds confidence among investors, regulators, and counterparties.
Strong, consistent governance aligned across jurisdictions reduces legal risk, enhances decision-making, and strengthens the company's reputation in global markets.
At Lampião & Sokolovich Attorneys, we help businesses design governance structures that work — legally, commercially, and practically — across borders.
If you're expanding internationally or restructuring your corporate governance framework, speak to our legal team about building governance structures that protect your business and meet global expectations.
Whether you're an investor, founder, or legal team, we offer clarity in complexity.
