The economy has been particularly hard hit by our response to the Covid-19 pandemic. As the dust begins to settle, business and the government are moving to set their organisations and the economy on the road to recovery. One effective weapon we have in our armoury should not be ignored: corporate governance.
Locally, the past decade and more have provided a graphic illustration of what happens when a country’s leadership is not focused on realising desirable goals.
Studies in the US, summarised in an article by Jay Eisenhofer entitled “Does corporate governance matter to investment returns?”, found that “the quality of a particular company’s governance practices and procedures positively correlates with both good corporate financial performance and shareholder value. Simply put, good corporate governance does in fact pay.”
Corporate governance not only helps firms outperform when markets are good; it also helps them better weather the consequences of an economic downturn, as demonstrated during the 2008 financial crisis. On December 31 2008, shares in well-governed companies bought in 1997 were worth five times a similar investment in the broad Latin American stock market.