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/