Question

Question 14: Good governance - has a value in the market place?

Answer 1

Yes, good governance does have a value in the market place.

Good governance is all about maximizing share holder value while ensuring that fairness, transparency and accountability to all stakeholders is maintained at all times. Good governance leads to the development of an ingrained value system and this fosters the hope and trust of all the stakeholders of the company. When all the stakeholders are on board and are working together to achieve the goals and objectives of a company then the company will be able to achieve its objectives optimally and in a sustainable manner.

We have good examples of Enron and World Com in which bad corporate governance ultimately led to the failure of these companies. As such investors value those companies that have a good governance mechanism in place. Good governance will ensure that the company provides proper financial disclosures, its board is independent and the rights of the shareholders are protected. Good governance ensures that the company is protecting not only the right of the shareholders but also is taking all steps to maintain and enhance the total value of the company. Thus a positive impact of good governance is reflected on the company’s valuation and it’s bottom-line. This positive impact has a substantial value in the market place.