Anyone who’s followed the ups and mostly downs of Twitter and its mercurial CEO Elon Musk understands that the person running a company has tremendous influence on its long-term profits and sustainability. But most organizations don’t have CEOs who are as public as Musk, and investors and stakeholders can’t check their news feed for information about executive leadership and how they are running a company.
Fortunately, more than 90% of S&P 500 companies now publish environmental, social, and governance (ESG) reports, and the U.S. Securities and Exchange Commission (SEC) may soon require additional ESG reporting. Governance data, in particular, reveals how organizations are being run today and whether they are prepared to meet future challenges.
What is included in governance metrics?
Who is in the C-suite? Does the Board of Directors consist of diverse individuals? Is the company's accounting accurate, and are its business practices ethical? What guiding principles, policies, and practices have executive leadership put in place? Governance metrics like these help stakeholders and investors assess the strength of the company, its leadership team, and their ability to manage risk.
While specific metrics may vary, companies commonly assess the following aspects of good governance practices: