While looking at Governance from the prism of ESG, we find that it is about how the top-level executive offices manage a company. Governance here means how well are the interests of the company's various stakeholders – employees, suppliers, shareholders, and customers attended by the management and the board of directors? For these to happen, a company needs to consider the following:
Board Transparency: ESG issues should become part of the regular board's agenda. As soon as ESG issues start getting a place in the boardroom regularly, there will be significant room for improvement.
Diversity: Companies should be doing more to promote racial and gender diversity in the workplace and among corporate directors.
Corporate Governance: Corporate Governance is about the board of directors' vision and how they govern and oversee the organization's operations. It is entirely different from the day-to-day operations set by the top floor executives of a company. The top executives need to prioritize broader ESG positioning – audit and internal controls, anti-competitive practices, philanthropy, etc.
Executive Compensation: The issue of executive compensation is a primary focus of many ESG investors. ESG investors don't favor multi-million-dollar bonuses for executives, while the company imposes a salary freeze for all other employees. The top executives need to ask these questions: Is extra compensation for executives appropriately tied to increasing the business's long-term value, viability, and profitability?
Accounting Transparency: Financial and accounting transparency and full and honest financial reporting are key elements of good Corporate Governance.