The role of the board of directors in the strategic management of a corporation is likely to be more active in the future.
Although neither the composition of boards nor the board leadership structure has been consistently linked to firm financial performance, better governance does lead to higher credit ratings and stock prices.
A McKinsey survey reveals that investors are willing to pay 16% more for a corporation’s stock if it is known to have good corporate governance.
The investors explained that they would pay more because, in their opinion (1) good governance leads to better performance over time, (2) good governance reduces the risk of the company getting into trouble, and (3) governance is a major strategic issue.