Key Terms

Research suggests that diversity in the workplace drives employee productivity, fosters creativity, improves problem-solving and increases profitability.

CEO, company leadership and boardroom diversity are some aspects that affect the G in ESG or the GOVERNANCE pillar.

KEY TERM: GOVERNANCE

Today we will be focusing on the G in ESG or GOVERNANCE

Governance is the internal system of practices, controls and procedures a company adopts in order to govern itself, make effective decisions, comply with the law and meet the needs of external stakeholders.

Examples: • Leadership • Executive pay • Audits • Internal controls • Shareholder rights • Business ethics • Board of directors diversity and structure • Bribery and corruption • Political lobbying and donations • Tax strategy and transparency • Compliance

Strong corporate governance promotes investor confidence.

How do governance factors impact company value?

• A diverse workforce and leadership team allows companies to benefit from a variety of perspectives • Strong governance guides decision making • Internal controls and audits improve company efficiency and improve profit • Data governance and security prevents data breaches and hackers from obtaining access to systems, which in-turn, protects company value • Strong business ethics reduce legal action and regulatory fines and penalities • Executive pay that is linked to corporate results means the executive is better aligned with stakeholders

When a company positively or negatively impacts governance factors, its stock price may fluctuate.

Review Last Week’s Investment Key Terms:

Mutual Fund:

A professionally managed fund that pools lots of investors’ money in order to buy a basket of investments.

ETF (Exchange Traded Fund):

A collection of stocks and bonds (or other securities) pooled into a single fund. You can buy and sell shares of ETFs on a stock exchange the same way you buy and sell stocks. Although they’re very similar to mutual funds, unlike mutual funds, you can trade ETFs throughout the trading day.