A Case for Modern Governance: The High Cost of Governance Deficits

| Annie Kors

About the Report

At a time when digital disruption, complexities in the geopolitical landscape, and the speed of information are all increasing, companies are under an incredible amount of pressure to perform well for shareholders and stakeholders alike. Corporate governance, at its best, serves as the guardrail that keep companies and their boards of directors on track while they move full speed ahead. But in the wake of a corporate crisis or scandal, public and media attention increasingly focuses on directors, asking: “How could the board let this happen?”

This Diligent Institute report begins to quantify the material cost of governance crises, and more importantly, the competitive advantage that comes with strong corporate governance practices. The report indicates the advantages companies can realize by practicing modern governance: empowering leaders with technology, insights, and processes to fuel good governance.

The report’s key findings include:

  • Companies with strong corporate governance (the top 20%) outperformed the bottom 20% by 15% in the most recent two-year period.
  • Companies with corporate crises fueled by governance deficits underperformed their sectors by 35%, on average, a year after the incident, losing approximately $490 billion in shareholder value.
  • Two years after experiencing the corporate crisis, companies lost approximately $250 billion of shareholder value, and underperformed in their sectors by 45%, on average.

About the Author

Annie Kors

Former Lead Researcher

Annie Kors worked as the original Lead Researcher for the Diligent Institute.She authored several reports for The Institute, including “Winds of Change: Environmental Sustainability Rises to the Board Level” and “Governing Through the Fog: Corporate Director Perspectives on Political Uncertainty.” Before joining Diligent, she held research roles at organizations in a variety of sectors including IT and technology consulting, higher education, and documentary filmmaking. She holds a BA in History from Yale University.