Corporate governance

Corporate governance refers to the systems and rules that determine how a company is directed and controlled, including how the board oversees management, how executive pay is set, and how shareholder rights are protected. Strong governance is meant to keep management accountable to shareholders rather than just to itself.

Investors care about governance because weak governance, such as a board that rubber-stamps management decisions or a CEO with too much unchecked power, has historically been linked to poor long-term outcomes for shareholders, even when the underlying business looks fine on paper.