Governance as one risk to consider

Herb Greenberg (here’s a link to his Market Blog), in the May 27 Weekend Investor, “Making Sense of the Risks Posed by Government Issues,” writes that investors should consider governance as one risk factors, which involves market and competitor risks: “Well governed companies face the same kind of market and competitor risks as everyone else…but the chance of an implosion caused by an ineffective board or management is way less.”

Included in the article is a reference to GovernanceMetrics International’s overview, the world’s first global corporate governance ratings agency: “companies that emphasize corporate governance and transparency will, over time, generate superior returns and economic performance and lower their cost of capital. The opposite is also true: companies weak in corporate governance and transparency represent increased investment risks and result in a higher cost of capital.”