Good governance: five steps to investment success
Weak corporate governance can have a major impact on shareholder returns and is therefore seen as a significant red flag for investors. But how do you spot poorly governed companies? Here are five steps to make sure the companies you invest in are being run properly.
Corporate scandals rarely favour a company’s fortunes. When gaps are uncovered in business accounts; or employees are found to be dishing out bribes; or a pension deficit drills a hole in a company’s profits, share prices normally react instantly – downwards. And then investors begin to ask the question: how did management not see this coming? It’s a fair concern which relates to the issue of governance, or the amount of control bosses have over their business. When news emerges that a company has been involved in dodgy deeds, governance is rightly questioned – management clearly didn’t have enough control.…