The Governance Factor in ESG

As S&P defines it, “G” refers to “the governance factors of decision-making, from sovereigns’ policymaking to the distribution of rights and responsibilities among different participants in corporations, including the board of directors, managers, shareholders, and stakeholders. The purpose of the corporation, the role and makeup of boards of directors, and the compensation and oversight of top executives have emerged as core issues in companies’ corporate governance structures.”

Conventional wisdom suggests that successful companies typically exhibit good governance, with strong management teams making decisions effectively and sustainably with a long-term focus.

Just as increased interest in ESG investing favours companies with solid environmental and social track records, so too are companies more closely scrutinised today for their corporate governance practices. Failing to maintain good governance can have immediate negative consequences, with recent examples including the WeWork IPO fiasco and the ongoing Wirecard debacle.

There is some overlap between the social and governance aspects of ESG. Consider, for example, how good governance typically entails inclusion and diversity, meaning there’s a healthy level of female and minority representation at board level.

Warren Buffett said as much in his 2020 letter to Berkshire Hathaway shareholders, noting in addition that achieving gender diversity at board level in most companies still have some way to go.

They certainly have incentive to do so – S&P Global Market Intelligence research, for example, showed that companies with more women serving as directors and in top management positions performed significantly better than companies dominated by men.

Buffet also posited that good corporate governance in companies entailed having truly independent directors on their boards. To this end, he cautioned against allowing high levels of director compensation to negatively impact their independent judgement and recommended regular executive sessions where board directors could convene impartially without the CEO.

Technology and data can also be a highly effective tool in helping companies enhance corporate governance.

According to Diligent Insights, technology can do this by:

  1. increasing transparency, information and accountability
  2. increasing public participation
  3. promoting efficient delivery of public goods and services
  4. offering a level of security to combat cyber risks

All these positive aspects are also articulated in our 'Compliance & Embedded Trust' proposition that is at the core of Dedoco’s products and solutioning.

For one, our platform facilitates the capture of both electronic and digital signatures compliant with most qualifications required by electronics signature regulations in the US, EU and Asia. This is possible because the platform captures timestamped records of both workflow and signers’ actions.

Dedoco Verify™ provides real-time verification of each document’s completion status, ensuring signer proof with secure 2-factor authentication.

Global trust is also built by allowing users to validate documents and adopt universal identity-tied certifications such as national and organisational identity certificates.

All of these features facilitate compliance and global connectivity, which is crucial in our globalised age.

How might Dedoco’s digital solutions help your company achieve greater transparency and accountability?

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