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Corporate Governance Advice for Publicly Traded Companies

There are 3 major themes or common roots for underperforming businesses. They include Capital Allocation, Compensation structure, and a succession plan.

Corporate governance is a major part of publically traded companies. There are 3 major themes or common roots for underperforming businesses. They include Capital Allocation, Compensation structure, and a succession plan.

A business and its board must understand the cost of capital and the returns of their business.
The compensation structure should not be based on revenue and EPS rather a performance based bonus structure.
A succession plan should always be at the top of the current leadership’s thought process because it is key to the future. GE does a great job with succession.

To Do

  • Adopt a sound capital allocation philosophy (Highest and best use) – usually growing your core business
  • Require a rolling 3 year business plan tied to compensation
  • Include a return metric in long term compensation
  • Tie succession to compensation and severance
  • Communicate all of the above to share holders

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