Weak corporate governance is a common thread found in many company failures. A lack of proper
oversight by the board of directors, inadequate protection for minority shareholders, and incentives at
companies that promote excessive risk taking are just a few of the examples that can be problematic for a
In response to company failures, regulations have been introduced to promote stronger governance
practices and protect financial markets and investors. Academics, policy makers, and other groups have
published numerous works discussing the benefits of good corporate governance and identifying core
corporate governance principles believed to be essential to ensuring sound capital markets and the stability of the financial system.
The assessment of a company’s corporate governance system, including consideration of conflicts of
interest and transparency of operations, has increasingly become an essential factor in the investment
Additionally, investors have become more attentive to environment and social issues related to a company’s
Collectively, these areas often are referred to as environmental, social, and governance (ESG).