There is a common belief that only large or public companies with many shareholders need to be concerned about, or can benefit from, implementing corporate governance practices.
The truth is that all companies regardless of size (big, medium or small), type of ownership (private or public), or stage early stage or established – compete in an environment where good governance is a business imperative.
In his final letter to directors of public companies worldwide, William McNabb III – Chairman and CEO of Vanguard Group (www.vanguard.com) who is being replaced by Mortimer “Tim” Buckley as of January 2018, states the four pillars on how Vanguard evaluates corporate governance practices.
A great board is one of a company’s most critical strategic assets. It is important to have the right mix of skill, expertise, thought, tenure and personal characteristics as well as a diverse board to obtain a growth in sustainable economic value while protecting shareholders interests.
As evidence proves, a board with more women outperform those that are less diverse. Diversity is one of most important Best Governance Practices.
Based on information on the 30% Club ( a global organization that advocates for greater representation of women in boardrooms and leadership roles) , currently in the S&P 100 the percentage is 23.6%, up from 20.2% in 2014, but in the S&P 500 the percentage is only 19.9%.
Shareholders rely on a strong board to oversee the strategy for identifying opportunities and mitigating risks. Shareholders expect the board to disclose relevant risks (such as the recent Uber cybersecurity breach in which Uber concealed the cyberattack for more than a year).
Engagement builds mutual understanding, and a basis for progress Dialogue with companies is core to Vanguard’s stewardship approach and should be on top of the companies priorities not only with Vanguard but with the rest of shareholders. Board and Management alike must communicate their perspective and think on the issues at hand must be a priority for all companies regarding of size.