Corporate governance and company performance

Protagonists of good corporate governance have never been slow in coming forward with the argument that what’s good for corporate governance is good for the share price. According to S&P Managing Director Andrea Esposito, ‘those companies with strong corporate governance cultures have more stable earnings per share’. With regard to the recent spate of corporate calamities, the President of the Institute of Chartered Accountants in England and Wales, Peter Wyman, remarked in 2002 that ‘behind every headline case is a failure of corporate governance’. James McRitchie, the Editor of CorpGov.net, is equally forthright:

There is no question that globalization of capital is on the rise. Countries and companies that seek to attract investors will need high scores on governance rating systems if they are to obtain low cost financing. Long term investors will seek markets where their legal rights are known and protected and where those using their money can be held accountable.