Let us start with the first part of our journey: why move from the Company Secretary (CoSec) to the Corporate Governance Officer (CGO)? In this article, we will describe the factors who have led to the concept of CGO. Through the steps of our journey, we intend to address the following questions: why, how, who and what is a CGO?

The creation of the CGO function stems from different factors:
 
Duality of governance concept

Corporate governance is a multifaced concept that integrates two dimensions: 

- A "values" dimension, which reflects the ethical principles, corporate culture, and stakeholders’ expectations that shape an organization and define the purpose of the organization;

- A "system" dimension, which comprises governance structures (e.g. board of directors, general meetings, committees), procedures, and the behaviours of key actors.
The effectiveness of corporate governance lies in the optimal balance between these two dimensions. Should the focus be on one dimension, the governance will not work (words without deeds lead to administrative burden).

The complexity of corporate governance 

Over time, governance frameworks have become increasingly complex due to evolving regulatory requirements, stakeholder expectations, and the growing emphasis on environmental, social, and governance (ESG) considerations. The related volume justifies the dedication of resources to the governance itself.

In the early stages of organizational development, businesses were typically run by "managers" for managers. There was little to no distinction between ownership and management. Governance was informal, dictated solely by the internal rules established by managers—this can be considered the first level of governance: "management rules".

As economies evolved, a growing distinction emerged between investors and managers. This separation created the need to formalize the relationship between investors and managers by setting clear boundaries on managerial actions and introducing control mechanisms – forming the second level of governance: “management of management”. 

As businesses and economies became more complex, a further need arose to regulate management through professional standards and oversight by administrative authorities. This led to the third level of governance: “regulation of management”.

Beyond regulation, governance continued to evolve towards harmonization, incorporating legal frameworks (laws, directives), and fundamental societal principles such as Corporate Social Responsibility (CSR), human rights, and constitutional values. This broader, principle-driven approach represents the fourth level of governance: “harmonization of governance”.

The coexistence and accumulation of these governance levels contribute significantly to the complexity of modern governance frameworks.

Evolution of the decision-making process

Another key factor contributing to the increasing complexity of corporate governance is the shift from vertical (hierarchical) to horizontal (decentralized) decision-making systems. This transformation is driven by a combination of economic, technological, social, and cultural factors:
 
(i) Need for Flexibility and Adaptability 
Traditional vertical structures, characterized by rigid hierarchies, struggled to adapt quickly to market changes. To remain competitive, companies decentralized decision-making, enabling experts to intervene directly at the operational level without excessive bureaucratic delays.

(ii) Digitalization & Technological Advances
The rise of digital technologies has reshaped information flow within organizations. Real-time communication and collaboration tools allow decisions to be made faster and at multiple levels, reducing reliance on long chain of command. 

(iii) Evolving Employee Expectations
Employees today seek greater autonomy, accountability, and participation in decision-making. A horizontal governance model empowers employees, enhancing engagement and motivation.
(iv) Global Competitive Pressures 

Companies must be faster, more innovative, and responsive to survive in a competitive global market. A horizontal decision-making structure allows for quicker responses to challenges, as decisions are made closer to operations rather than being delayed by hierarchical bottlenecks.
While this transition enhances agility and responsiveness, it also adds complexity to governance structures, requiring new mechanisms to ensure oversight, accountability, and strategic alignment.

Regulatory Pressure

The harmonization of governance and regulation (see Levels 3 and 4 above) has been widely pursued by governments and regulatory bodies in recent years, leading to increased regulatory pressure on organizations. Organisations today have to deal with an increasing number of laws, regulations, and compliance requirements, in addition to frequent audits and regulatory reviews. This makes continuous regulatory monitoring a necessity, adding complexity and operational burden to the corporate governance practice.

To address this, many organisations have created specialised functions dedicated to specific regulations or have established compliance tasks to ensure adherence to them. However, integrating these functions into organizational decision-making has proven to be a challenge, as the increasing number of actors in the governance system often results in fragmented decision-making, inefficiencies, and rising compliance costs.

As a result, organisations are seeking fundamental solutions to proactively manage complexity while simultaneously simplifying internal processes. Some companies have attempted to multiply governance structures or expand specialist teams. However, this approach has led to new challenges, including higher costs, slower decision-making, and organisational inertia. A more strategic and holistic approach is needed to ensure corporate governance remains effective and adds value in the long term.

The CGO is a key player in managing this balance, ensuring that governance frameworks are both strategically aligned and operationally effective.

Let’s summarise: 

 
The CGO function is justified by the combination of these above factors but also potentially by the creation of a community with high standards of qualifications would probably facilitate the dissemination of the regulations not by constraints, penalties but by trusting the efficiency of the governance of each organization.

What’s next?

In our next article we will explore the key differences between the CGO and the CoSec in Luxembourg.