Playing the Procedural Card in Corporate Chess

By Maria Lucia Passador, Assistant Professor of Law, Bocconi University; 2025 Winner of ACC’s Carl Liggio Memorial Paper Competition

Corporate governance is evolving under mounting complexity, regulatory scrutiny, and stakeholder expectations. One trend shaping this transformation is the “proceduralization” of corporate law—the growing reliance on formal rules and processes as proxies for accountability. While this shift promises transparency and legitimacy, it also creates challenges for boards, including balancing expertise, avoiding governance theatre, and preserving meaningful oversight.

This blog post explores what proceduralization means, why it matters, and how boards can prevent governance from becoming mere performance.

Why Is Proceduralization Rising?

The proceduralization of corporate law refers to the growing emphasis on formal rules and processes guiding the actions of shareholders, directors, managers, and regulators. This trend reflects the increasing complexity, diversity, and unpredictability of modern corporate environments and the need to reconcile competing stakeholder interests.

At its core, proceduralization is a response to judicial deference to business judgment, which has encouraged corporations to demonstrate accountability through structures rather than outcomes. The aim is not only to insulate directors from liability but also to reinforce legitimacy through clear standards for transparency, deliberation, and decision-making.

Governance codes such as the UK Corporate Governance Code illustrate this shift. They set out expectations for boards, shareholders, auditors, and remuneration committees on a “comply or explain” basis, making procedural conformity a key measure of governance quality. Many corporations go further, adopting compliance systems that exceed legal requirements. For example, a technology corporation might voluntarily impose strict data-protection protocols, commission external audits, and publish detailed transparency reports to rebuild trust and show its commitment to safeguarding information. In this way, proceduralization extends beyond regulation, embedding itself in corporate culture as a tool for managing uncertainty and maintaining legitimacy.

The Intrinsic Paradox and Hidden Costs

Despite its intent to strengthen accountability, proceduralization often increases boards’ reliance on external consultants and specialist directors. Boards seek expertise in areas like technology, sustainability, cybersecurity, or diversity—but in doing so, they may unintentionally heighten legal risk. Fiduciary duties, once grounded in substantive judgment, risk becoming formalistic exercises in compliance.

Governance may then devolve into performance, where boards prioritize procedural safety over meaningful oversight. The result is the rise of “theatre boards,” institutions that act out governance through ritual rather than deliberation. This tension highlights the danger of mistaking form for substance, with fiduciary responsibility diluted into little more than procedural choreography.

The costs of proceduralization compound this paradox. Maintaining compliance with proliferating rules, codes, and standards brings heavy administrative and financial burdens, including legal fees, reporting requirements, audits, and consultant engagements. Far from reducing agency costs—the classic divergence of interests between directors and shareholders—proceduralization may exacerbate them.

Directors increasingly focus on ticking procedural boxes rather than exercising sound business judgment. External advisors, while offering valuable expertise, can shift authority away from the board and introduce new conflicts of interest. Moreover, consultants are not neutral referees; they bring their own incentives, reputational concerns, and institutional biases, which may steer decisions in directions that serve them more than the corporation. Rather than solving agency problems, proceduralization risks magnifying them as boards cling to process to signal diligence.

Setting the Pieces: Reimagining the Boardroom as a Chessboard

Still, the need for expertise cannot be ignored. Modern corporations face challenges—climate risk, digital disruption, regulatory scrutiny—that exceed the knowledge base of most boards. While specialist directors provide continuity in key areas, external consultants deliver targeted insights during periods of acute change.

These approaches are complementary, not necessarily mutually exclusive. A board with sustainability specialists may still consult external auditors on carbon accounting, and finance experts may call in cybersecurity specialists during a crisis. Therefore, the real question is not whether to appoint specialist directors or hire consultants, but how to balance and integrate the two forms of expertise.

The boardroom can be imagined as a chessboard. Permanent directors resemble rooks or knights—reliable, bounded by predictable moves, and essential for stability. External consultants, by contrast, operate like agile pieces deployed at critical moments—sometimes decisive but not permanently stationed. Neither secures victory alone.

Effective governance requires coordination, timing, and balance, knowing when to rely on steady expertise and when to mobilize external input. Mismanaging this balance risks either rigidity, where the board lacks the flexibility to respond to new challenges, or over-dependence on outsiders.

The Real Game: Turning Form into Substance

The broader picture is that while proceduralization reinforces accountability, it may also foster a culture more concerned with appearance than authentic oversight. Specialist directors may risk becoming symbols of compliance rather than engines of deliberation, and consultants may offer expertise at the expense of board autonomy. Both offer value but carry the risk of hollowing out substantive governance. The challenge lies in ensuring procedural structures serve as tools for genuine deliberation, not substitutes for it.

Ultimately, corporate governance remains a high-stakes chess match, where the true opponent is the complexity of modern business. Fiduciary duties require directors to balance long-term strategy with immediate pressures, stability with adaptability, and integrating expertise without surrendering oversight. Just as in chess, each piece must be deployed with foresight and coordination. Effective governance depends on harmonizing internal and external resources. The risk is that boards, distracted by the theatre of compliance, may sacrifice substance for procedural safety.

The task, then, is to ensure that proceduralization strengthens governance, turning form into a vehicle for substance rather than a substitute for it.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.