Corporate Governance Term category: General Business In 10 words or less: The relationship between management, the board, and shareholders.
Definition: Corporate governance refers to how well a company's management and board are looking out for shareholders' interests.
StockJargon Advice: As shareholders, investors' should be assured that management and the board are doing the right thing for them. Companies that do a good job of looking out for shareholders' interests are said to have good corporate governance, whereas companies that don't do the right thing are said to have poor corporate governance.
In regards to corporate governance, companies that do a good job usually have a few things in common:
1.) Separate chairmen and CEO's 2.) Reasonable pay package for executives 3.) Cumulative voting 4.) Reasonable stock option issuance 5.) Management has a stake in the company 6.) Independent board members 7.) Expensing stock options 8.) No separate voting class of stock