But while environmental and social issues may attract media attention, it is good governance that enables companies to build an effective ESG strategy
Corporate governance is not yet a priority for companies. Out of a sample of more than 500 sustainability professionals, Morningstar Sustainalytics found that 46% of respondents consider corporate governance to be the least important aspect of their ESG plans. But while environmental and social issues may attract media attention, it is good governance that enables companies to build an effective ESG strategy.
Corporate governance is the set of rules, practices and processes that determine the way a company is managed and controlled. Its main objective is to ensure that the company acts openly and responsibly and that its leadership acts in the best interests of its stakeholders. Corporate governance encompasses virtually every aspect of management, regardless of industry.
With the recognition that a company’s board, shareholders and employees have certain rights, good corporate governance policies incorporate measures to ensure that those rights are protected. These measures may include processes for selecting and evaluating board members, establishing review committees, and implementing codes of conduct and ethics. If implemented correctly, corporate governance aligns the interests of directors, shareholders, executives and employees and builds trust with investors, the community and public officials.
Companies with better corporate governance processes tend to achieve their goals more consistently than those without. Conversely, poor corporate governance can undermine a company’s integrity, trustworthiness, ability to raise capital, and hinder its ESG ambitions.
More generally, corporate governance is considered by analysts to be a significant variable influencing an economy’s growth prospects because best governance practices can reduce risk for investors and improve financial performance.
Source-www.adnkronos.com