Sound corporate governance is important to the health of individual firms, economies and the promotion of long-run economic growth. Its hallmarks are the protection of shareholder interests, the prevention of fraud, and observance of transparent financial reporting norms.
There is not one best way to structure a firm’s governance, and homogeneity – particularly that enforced by regulators or other interests – constitutes a threat to the integrity of firms and the health of industries and economies. Sound and effective corporate governance structure can and will vary by firms, across industries and nations.
Activist efforts to alter corporate governance structures to produce politically-motivated outcomes constitute a corruption of corporate governance and a threat to the health and well-being of the private free enterprise system. Activists have been pressuring to reform corporate governance in an effort to short-circuit more transparent forms of political action. These efforts are inimical to the interests of shareholders and consumers and threaten to weaken long-run economic growth.
World Growth supports stable, honest, and transparent corporate governance that is responsive to the needs and interests of shareholders.
Corporate Governance Principles
1. Prudent Risk-Taking – Corporate governance should encourage the prudent risk-taking and creativity required to help enterprises grow and thrive.
2. Limited Regulation – Excessive and short-sighted regulation of corporate governance poses a threat not just to individual firms but to the broader economic ecosystem.
3. Balance – Effective corporate governance strikes a right balance between avoiding mistakes on the one hand and creating opportunities on the other.
4. Heterogeneity – There is not one best way to structure corporate governance. While best practices must be heeded, there will be a variety of corporate governance across industries, sectors and countries.
5. Bolster Competition – Healthy competition is the surest way to ensure stable and intelligent long-run corporate governance.
6. Ownership is a Virtue – Ensuring that corporate directors have significant direct holdings of a firm helps ensure wise corporate governance