Retain Your Investors' Trust With Corporate Governance

Investors, whether institutional or retail, are the owners of the company. They appoint Directors, who together form a Board, to ensure that their interests are not compromised. The Board in turn is accountable to these investors. Corporate governance  is the structure through which the Board lays down policies and processes to ensure that management conducts the business of the company fairly, transparently and justly. Over a period of time, if these systems operate effectively, and if the Board ensures that the interests of stakeholders are not compromised, investors start trusting it. A company with a robust corporate governance mechanism stands tall even during the tough times and successfully retains its investors.

Every organisation operates in an environment of uncertainty. Some of these factors are internal and controllable, but some are external and uncontrollable.  While the organisation can control the internal factors, it does not have any control over the external or the exogenous factors. The economic slowdown is one such external factor that affects the overall operation of an organisation to a great extent, but on which the company has not control.

Though the company cannot govern the market's terms and conditions, it can certainly sail through tough situations if it has gained and maintained the trust of its stakeholders in the past. Companies with good corporate governance structure often succeed in retaining the trust of its investors and in turn the market value. This also gets reflected through the reputation / image that the company enjoys.

There is enough empirical evidence to suggest that market rewards governance through a governance premium. Companies that are perceived to be well governed and have a good reputation, enjoy a premium in the market, through the price of the shares. In turn, investors stand to benefit since the value of their stock goes up.  For Information https://www.excellenceenablers.com/

Protect Stakeholders' Interest With Corporate Governance During M&A

In the modern business framework, Mergers & Acquisitions (M&A) have become one of the major tools to expand a business, whether within the country or internationally. However, with lucrative business opportunities, this also brings along the risk of losing millions of funds that are put on stake, should the deal go wrong. It is important that in an M&A deal, the deal should not end up risking the money of the company. It is this risk that needs to be mitigated, and corporate governance audit practices can play a vital role in this.

When a company decides to takeover another company, one of the key considerations that it has, in addition to the business model and financials, is the quality of senior management personnel and general management of the company. The Board of a company has a huge role in selecting the senior management. Also, effectiveness of management at the top is another related important criteria.Since proposal and approval for M&A transactions is done by senior management personnel and the Board, the quality of persons is very important. Good corporate governance structure will not only ensure a good management team but also a good quality of Board members. It would also ensure good and proper practices exist throughout the company, including for identifying deals such as M&A deals, which would be beneficial for the shareholders. Reputation of the company is another important criteria that is looked at in such deals. The custodian of reputation is the Board, and a Board comprising good Directors, would be very careful in preserving the reputation of the company.if all these factors exist, the valuation of the company increases. As it is, there is a governance premium attached to good companies. This premium ensures that the market capitalisation of the company is high because markets believe that the company is well governed and does the right things in a transparent manner. All this in turn benefits the shareholders of the company who are the owners of the company.

Consequently, a failed M&A deal may raise questions on the management and the governance of the company, thereby adversely impacting on its reputation. Effective governance processes will help establish proper, functioning and adequate enterprise risk mitigation systems that will help develop a firewall against risks, especially those that could arise out of failed M&A deals. Better governance can help reduce the risks of unsuccessful or over-priced M&A deals as well as reducing the likelihood of harm to minority shareholders. For more information: https://www.excellenceenablers.com/