Page 9 - FINAL CFA I SLIDES JUNE 2019 DAY 10
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Session Unit 10:
34. Corporate Governance and ESG: An Introduction
LOS 34.h: Identify potential risks of poor corporate governance and stakeholder management and
identify benefits from effective corporate governance and stakeholder management., p.9
Risks of poor governance and stakeholder management
• Some stakeholders can gain an advantage, to the disadvantage of other
stakeholders.
• Accounting fraud, or poor recordkeeping = negative implications for performance
and value. tanties
• Agency problems –management incentive compensation not aligned with
shareholders goals.
• Poor compliance with regulation and reporting can easily lead to legal and
reputational risks -failure to manage creditors’ rights can lead to debt default and
bankruptcy.
Reverse is true for good corporate governance and stakeholder
management
