Good governance: an important consideration

The Federal Treasury recently conducted a study on ASX listed companies which linked financial performance to compliance with the ASX Corporate Governance Council’s Principles of Good Corporate Governance.

Not surprisingly, the research suggests that well-governed companies perform better than poorly-governed companies. The study found that good corporate governance is associated with higher:

  • earnings per share;
  • return on assets; and
  • sales growth.

In the current economic climate, it is little wonder that corporate governance is high on the agenda of regulators and investors alike. The corporate governance philosophy that a company adopts will have an effect on:

  • the way in which the company sets goals and measures success;
  • the way in which the company assesses and manages risks; and
  • the cost of capital, with investors turning to companies with a demonstrated corporate governance track record.

Now is the perfect time for companies in the listed space to spend some time assessing their corporate governance position and updating their policies and practices to ensure that they are in accordance with the current Corporate Governance Principles.

We expect to see a renewed emphasis on, and regulation of, corporate governance arrangements flowing out of the present economic circumstances and recent corporate collapses.

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