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One of the characteristics I commonly look at when considering an investment is employee turnover. How often does a company lose talented people? Think about it: you have your biggest investment in the company you work for. If the pool of employees around you is constantly changing, for one reason or another, this could indicate something about your company, its culture and its governance. Corporate governance involves the balancing of interests of stakeholders including shareholders, employees and managers. Why does governance matter? Research shows that companies with strong shareholder rights, an element of corporate governance, (as outlined in a corporation’s shareholder rights plan, typically accessible on the company’s investor relations website) can have higher firm values, profits and sales growth than peers with weaker shareholder rights. While it may not be everything you need to know in order to pass any of the CFA exams, these lessons can help you navigate through the investment decision process.
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