Lex: Governance

Nice guys finish last. For an angst-filled teenager without a girlfriend, the old adage must feel all too true. But companies that treat their shareholders well appear to benefit from superior share price performance compared with more remiss peers.


Quantifying standards of governance is not foolproof. Indeed, the UK combined code states that a “box-ticking” approach should be avoided. Separating cause and effect and the impact of governance on performance from other factors can be tricky.

Changes to the corporate structure of Royal Dutch/Shell, for example, are a positive step. But their implementation will increase Shell's FTSE All-Share weighting, forcing tracker funds to buy stock. It is difficult to isolate the impact of the principle from the squeeze produced by the practicalities.

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