A-Z of Corporate Governance

A

Abatement

Measures to reduce or eliminate financial, environmental, or operational risks. In corporate governance, abatement practices focus on compliance with regulations, risk management, and ensuring sustainable business operations.

Abnormal returns and volumes

Returns and trading volumes that deviate significantly from normal levels. Corporate governance analyzes these anomalies to understand market reactions to corporate actions or news, ensuring transparency and investor protection.

Acceleration remedy

A contractual provision allowing a lender to demand full repayment if certain conditions are breached. Corporate governance ensures such remedies are used fairly and transparently, protecting creditor rights and maintaining financial stability.

Accountability

Accountability in corporate governance involves the obligation of the company's management and board to provide explanations and justifications for their decisions and actions to stakeholders, including shareholders, employees, customers, and the community. It ensures transparency, responsibility, and ethical conduct, promoting trust and integrity within the organization.

Accounting harmonization

The process of standardizing accounting practices across different jurisdictions. Good governance promotes harmonization to enhance comparability, transparency, and investor confidence.

Accounting standards

Guidelines for financial reporting and disclosure. Effective corporate governance ensures compliance with these standards, maintaining transparency and protecting stakeholder interests.

Acqui-hire

Acquiring a company primarily for its talent rather than its products. Governance ensures such acquisitions align with strategic goals and manage integration risks effectively.

Acquisition premium

The amount paid over the market value to acquire a company. Effective governance ensures premiums are justified by strategic benefits and potential synergies.

Acquisitions

Acquisitions refer to the process where one company purchases most or all of another company's shares or assets to take control. This can involve strategic decisions to expand market share, acquire new technologies, or achieve synergies. Proper governance ensures such deals align with shareholders' interests and regulatory standards.

Acting in concert

When investors collaborate to influence a company's management and policies. Corporate governance ensures such actions comply with regulations and protect all shareholders' interests.

Active funds

Investment funds managed actively to outperform the market. Governance ensures active funds operate transparently, ethically, and in the best interests of investors.

Active investors

Shareholders who engage with company management to influence decisions. Effective governance facilitates active investor engagement, ensuring their concerns are addressed and incorporated into corporate strategies.

Active ownership

The practice of shareholders using their rights to influence company policies and practices. Good governance supports active ownership through transparent communication and responsive management.

Active shareholders

Shareholders who actively participate in governance by voting, attending meetings, and engaging with management. Effective governance ensures their involvement is constructive and aligned with long-term goals.

Activism

Activism refers to the efforts by shareholders to influence a company's behavior by exercising their rights. This can involve pushing for changes in management, strategy, or operations to enhance shareholder value. Activist shareholders often use their stakes to advocate for improved governance, transparency, and accountability.

Activism waves

Periods of increased shareholder activism. Corporate governance adapts to activism waves by ensuring transparency, responsiveness, and alignment with shareholder interests.

Activist hedge fund

Hedge funds that acquire significant stakes in companies to influence management and strategic direction. Good governance ensures that their interventions are aligned with long-term value creation.

Activist interventions

Actions taken by activist investors to influence company policies. Corporate governance ensures these interventions are constructive, transparent, and in the best interests of all stakeholders.

Activist investors

Shareholders who seek to influence a company's direction and policies. Effective governance engages with activists to address their concerns and align strategies with shareholder interests.

Activist settlements

Agreements between companies and activist investors to resolve disputes. Good governance ensures settlements are fair, transparent, and promote long-term value.

Activist shareholders

Shareholders who actively seek to change company policies or management. Effective governance involves engaging with these shareholders to address their concerns and align with strategic goals.

Ad hoc bailout

Unplanned financial assistance to a struggling company. Effective governance involves transparency and accountability in providing such bailouts to protect stakeholder interests.

Ad hoc disclosure

Non-regular disclosure of important information. Good governance ensures that ad hoc disclosures are timely, accurate, and comply with regulatory requirements to maintain transparency.

Administrative law

The body of law governing the activities of administrative agencies. Corporate governance ensures compliance with administrative law to promote transparency and accountability in interactions with regulators.

Administrative procedure act

The Administrative Procedure Act (APA) is a U.S. federal statute that governs the process by which federal agencies develop and issue regulations. It ensures transparency, public participation, and accountability in the rule-making process, impacting how corporations comply with regulatory requirements and interact with government agencies.

Administrative rulemaking

The process by which administrative agencies create regulations. Good governance involves engaging with rulemaking processes to ensure that company practices comply with new regulations.

Adverse selection

A situation where one party in a transaction has more information than the other, leading to suboptimal outcomes. Effective governance includes measures to mitigate adverse selection, such as transparency and due diligence.

Advisory voting

Non-binding votes by shareholders on specific issues, such as executive compensation. Good governance uses advisory voting to gauge shareholder sentiment and inform decision-making.

Affiliated funds

Investment funds that are part of the same financial group. Effective governance ensures that transactions between affiliated funds are conducted transparently and in the best interests of investors.

Agency

Refers to the relationship between shareholders (principals) and company executives (agents). In corporate governance, it addresses how agents are expected to act in the best interests of principals, ensuring that management decisions align with shareholders' goals and reduce conflicts of interest.

Agency capitalism

A system where managers and directors act as agents for shareholders. Good governance mitigates agency conflicts by aligning management actions with shareholder interests through incentives and oversight.

Agency conflicts

Disputes between shareholders and management over control and decision-making. Effective governance involves mechanisms to align interests and resolve conflicts transparently.

Agency conflicts in fund management

Conflicts between fund managers and investors. Good governance includes measures to align fund managers' actions with investors' interests, such as performance-based fees and transparency.

Agency costs

These are costs incurred due to conflicts of interest between shareholders and management. They include monitoring expenses, bonding costs, and residual losses. Effective governance mechanisms aim to minimize these costs by aligning interests and enhancing accountability.

Agency costs of debt

Costs arising from conflicts between shareholders and debt holders. Good governance involves managing these conflicts through covenants, monitoring, and transparent reporting.

Agency costs of free cash flow

Risks associated with excess cash that may be misused by management. Effective governance includes measures to ensure that free cash flow is used productively and aligns with strategic goals.

Agency frictions

Challenges arising from conflicts between principals and agents. Good governance reduces frictions through clear policies, alignment of interests, and effective communication.

Agency problems

Issues resulting from conflicts of interest between shareholders and management. Effective governance includes mechanisms to mitigate these problems, such as performance-based incentives and robust oversight.

Agency theory

A framework explaining the relationship between principals and agents. Corporate governance applies agency theory to design structures and practices that align interests and enhance accountability.

Agglomeration economies

Cost advantages resulting from businesses clustering together. Good governance ensures that agglomeration benefits are leveraged strategically, promoting efficiency and innovation.

Aggregate litigation

Legal actions involving multiple plaintiffs or cases. Corporate governance ensures that aggregate litigation is managed transparently and fairly, protecting the company’s interests and reputation.

Aggregate outcomes

The overall results of corporate actions or policies. Effective governance involves analyzing aggregate outcomes to assess performance, inform decision-making, and enhance strategy.

Aggregation of information

The process of collecting and combining data from various sources. Good governance ensures that information aggregation is accurate, timely, and used to support informed decision-making.

Aggressive accounting

Practices that push the boundaries of accounting standards to present a more favorable financial picture. Effective governance includes controls to prevent aggressive accounting and ensure transparency.

AI borrower classification

Using AI to assess and categorize borrowers' creditworthiness. Effective governance ensures that AI classifications are accurate, fair, and comply with regulatory standards.

AI-enabled credit scoring

The use of AI to evaluate credit risk. Good governance ensures that AI credit scoring models are transparent, unbiased, and compliant with regulations to protect borrowers and lenders.

AIFMD

The Alternative Investment Fund Managers Directive, a regulatory framework for alternative investment funds in the EU. Good governance ensures compliance with AIFMD to protect investors and promote transparency.

Algorithmic discrimination

Bias in AI algorithms leading to unfair outcomes. Good governance involves identifying and mitigating algorithmic discrimination to ensure fairness and ethical AI use.

All-shareholder returns

The total return to all shareholders, including dividends and capital gains. Effective governance focuses on maximizing all-shareholder returns through strategic decision-making and transparent reporting.

Allocation of authority

The distribution of decision-making power within an organization. Good governance ensures that authority is allocated transparently and aligns with strategic goals and accountability.

Allocation of regulatory powers

The distribution of regulatory responsibilities among authorities. Effective governance involves ensuring clarity, efficiency, and accountability in the allocation of regulatory powers.

Allocation of talent

The strategic placement of employees within an organization. Good governance ensures that talent allocation aligns with business needs, promotes diversity, and supports growth and innovation.

Allocative efficiency

The optimal distribution of resources to maximize value. Good governance promotes allocative efficiency through strategic planning, transparent decision-making, and effective resource management.

Allowance for corporate equity

A tax policy allowing deductions based on equity financing. Corporate governance ensures compliance with such policies to optimize tax efficiency and support financial stability.

Alpha

A measure of investment performance relative to a benchmark. Good governance ensures that alpha is generated through ethical practices, transparency, and alignment with investor interests.

Alternative financing solutions

Non-traditional methods of raising capital, such as crowdfunding. Effective governance involves evaluating and implementing these solutions transparently and strategically to support growth and innovation.

Alternative investment fund managers directive

EU regulation governing alternative investment funds. Good governance ensures compliance with this directive to protect investors and promote transparency and stability.

Alternative investments

Non-traditional assets like real estate, commodities, and private equity. Good governance ensures these investments are managed transparently, ethically, and align with the overall strategic objectives.

Altruism

Selfless concern for others' well-being. In corporate governance, altruism can be reflected in corporate social responsibility initiatives that promote social and environmental benefits.

Ambiguity aversion

Preference for known risks over unknown risks. Good governance includes strategies to manage and communicate uncertainties clearly to support informed decision-making.

American rule

A principle where each party in a lawsuit pays its legal fees, regardless of outcome. Corporate governance ensures transparency and fairness in litigation processes, adhering to applicable legal principles.

Angels

Individual investors who provide capital to startups. Effective governance involves ensuring that angel investments are aligned with strategic goals, transparent, and support sustainable growth.

Announcement effects

Market reactions to news about a company's actions or events. Good governance analyzes announcement effects to understand investor sentiment and adjust strategies accordingly.

Announcement period return

The stock price movement during the period surrounding a significant announcement. Effective governance uses these returns to gauge market reaction and assess strategic decisions.

Annual general meeting

A yearly gathering of a company's shareholders. Good governance ensures that AGMs are conducted transparently, allowing shareholders to engage with management and vote on important issues.

Annual incentive plans

Compensation plans based on yearly performance. Effective governance ensures these plans align with strategic goals, motivate executives, and promote long-term value creation.

Anti-bribery

Policies and practices to prevent bribery and corruption. Good governance includes robust anti-bribery measures to ensure ethical conduct and compliance with legal standards.

Anti-director rights index

A measure of shareholder protection rights in different countries. Effective governance involves understanding and adhering to these rights to protect shareholder interests and promote transparency.

Anti-domination principle

Policies to prevent majority shareholders from exploiting minority shareholders. Good governance ensures that all shareholders are treated fairly and equitably.

Anti-graft law

Legislation aimed at preventing corruption and unethical practices. Corporate governance ensures compliance with anti-graft laws to maintain ethical standards and public trust.

Anti-political posturing

Avoiding unnecessary political statements or actions. Good governance involves maintaining neutrality and focusing on business objectives to protect the company's reputation and stakeholder interests.

Anti-recharacterization laws

Laws preventing the misclassification of financial transactions. Effective governance ensures compliance with these laws to maintain transparency and accuracy in financial reporting.

Anti-self-dealing index

A measure of legal protections against insider transactions. Good governance involves adhering to these protections to prevent conflicts of interest and protect shareholder value.

Anti-takeover defenses

Strategies to prevent or deter hostile takeovers. Effective governance ensures these defenses are used appropriately to protect shareholder interests and align with long-term strategic goals.

Anti-takeover law

Legislation regulating the prevention of hostile takeovers. Good governance ensures compliance with these laws to maintain fair and transparent corporate practices.

Anti-takeover mechanisms

Tools used to defend against hostile takeovers. Corporate governance ensures these mechanisms are used transparently and align with the best interests of all stakeholders.

Anti-takeover provisions

Clauses in a company’s charter or bylaws to deter hostile takeovers. Good governance ensures these provisions are transparent, justified, and protect shareholder value.

Anti-takeover statutes

Laws enacted to prevent hostile takeovers. Effective governance ensures compliance with these statutes, balancing defense mechanisms with shareholder interests.

Antishareholder mechanisms

Strategies that disadvantage shareholders, often used in takeovers. Good governance avoids such mechanisms to ensure fairness, transparency, and alignment with shareholder interests.

Antitakeover defenses

Measures taken to protect a company from hostile takeovers. Effective governance involves using these defenses appropriately to safeguard shareholder value and strategic goals.

Antitrust

Laws designed to promote fair competition and prevent monopolies or unfair business practices. In corporate governance, antitrust regulations ensure companies operate in a competitive environment, fostering innovation and protecting consumer interests.

App-based trading platforms

Digital platforms for trading securities. Corporate governance ensures these platforms operate transparently, securely, and in compliance with regulations to protect investors.

Application programming interfaces

APIs allow different software systems to communicate. Effective governance involves ensuring that APIs are secure, reliable, and used to enhance operational efficiency and transparency.

Appointment of directors

The process of selecting board members. Good governance ensures that appointments are based on merit, transparency, and alignment with the company’s strategic goals.

Appointment rights

Shareholders' rights to appoint directors. Effective governance ensures that these rights are respected and that the appointment process is transparent and fair.

Appraisal

The evaluation of a company's assets or value. Good governance ensures appraisals are accurate, transparent, and used to inform strategic decisions and protect stakeholder interests.

Appraisal arbitrage

Investors buying shares to participate in legal proceedings for a higher valuation. Effective governance involves managing appraisal rights transparently and protecting shareholder interests.

Arag-Garmenbeck

A principle in German corporate law relating to shareholder litigation rights. Good governance ensures compliance with this principle to protect shareholder rights and promote transparency.

Arbitrage

The practice of taking advantage of price differences in different markets. Effective governance involves monitoring arbitrage activities to ensure they are conducted ethically and transparently.

Arbitration

A method of resolving disputes outside the courts. Corporate governance ensures that arbitration processes are fair, transparent, and align with legal standards to resolve conflicts efficiently.

Arithmetic average

The simple average of a set of numbers. In corporate governance, this metric is used to analyze financial data and performance indicators to inform decision-making.

Asian financial crisis

A major financial crisis in the late 1990s that impacted many Asian economies. Corporate governance involves learning from such crises to improve risk management and resilience.

Asset allocation

The strategy of distributing a company's resources among different investments to balance risk and return. Effective governance ensures that asset allocation decisions align with the company’s strategic objectives and risk tolerance.

Asset managers

Professionals who manage investments for individuals or institutions. Good governance ensures that asset managers operate transparently, ethically, and in the best interests of their clients.

Asset partitioning

Separating assets into distinct groups to limit liability and protect interests. Corporate governance ensures that asset partitioning is done transparently and aligns with strategic goals.

Asset pricing

The determination of asset values. Effective governance ensures that asset pricing models are accurate, transparent, and used to inform investment decisions and risk management.

Asset substitution

Risky investments undertaken by managers that transfer value from debt holders to shareholders. Good governance involves monitoring and mitigating such actions to protect all stakeholders.

Assignment for the benefit of creditors

A process where a company assigns its assets to a trustee to pay off debts. Good governance ensures this process is transparent, fair, and compliant with legal standards.

Assignment models

Frameworks for assigning tasks or resources. Effective governance uses assignment models to allocate responsibilities transparently and efficiently, aligning with strategic goals.

Asymmetric information

Occurs when one party in a transaction has more or better information than the other. In corporate governance, this can lead to moral hazard and adverse selection, making transparency and disclosure critical to mitigate these risks.

AT1 bonds

Contingent convertible bonds that absorb losses when the issuing bank's capital falls below a certain level. Effective governance involves managing these instruments transparently and aligning with regulatory requirements.

Audit

An independent examination of financial statements and operations. Good governance involves conducting regular audits to ensure accuracy, transparency, and compliance with standards.

Audit committee

A board committee responsible for overseeing the audit process. Effective governance ensures that audit committees are independent, competent, and focused on ensuring transparency and accountability.

Aufsichtsrat

The supervisory board in German corporate governance, responsible for overseeing management. Effective governance ensures that the Aufsichtsrat operates independently, transparently, and in the best interests of stakeholders.

Australian banking royal commission

An inquiry into misconduct in Australia's banking sector. Corporate governance involves learning from such inquiries to improve transparency, accountability, and ethical standards.

Authorized participants

Entities that create or redeem shares in exchange-traded funds (ETFs). Good governance involves ensuring that authorized participants operate transparently and align with regulatory standards.

Autopoiesis

A concept in systems theory where a system is self-creating and maintaining. In corporate governance, it refers to the self-regulating and self-improving nature of effective governance systems.

B

B. Corp.

Also known as a Benefit Corporation, this legal status for businesses includes a commitment to higher standards of social and environmental performance, accountability, and transparency. Good governance in a B. Corp. involves integrating these goals into business strategies and reporting transparently on progress to balance profit with purpose.

Bad faith

Intentional dishonest or deceptive behavior. Good governance ensures that actions and decisions are made in good faith, promoting transparency, integrity, and trust within the organization.

Bad-law jurisdiction

A term for regions with weak legal systems that may not enforce laws effectively. Effective corporate governance involves mitigating risks associated with operating in such jurisdictions through robust compliance and risk management strategies.

Bail-in

A financial mechanism where a failing company’s creditors and shareholders bear some of the losses by converting debt into equity. This governance tool helps stabilize the company without resorting to taxpayer-funded bailouts.

Bail-out

Financial support from the government to a failing company to prevent its collapse, often to protect the broader economy. Effective governance requires such interventions to be transparent and justified, with measures to prevent future dependency.

Bank bidding

The process by which banks compete for business opportunities or assets. Good governance ensures that bidding processes are transparent, fair, and aligned with regulatory standards.

Bank capital requirements

Regulatory standards that determine the minimum capital banks must hold to cover risks. Good governance ensures compliance with these requirements to maintain financial stability and protect stakeholders.

Bank regulation

Rules and standards set by authorities to ensure banks operate safely, soundly, and in the public interest. Governance in banking involves compliance with these regulations to mitigate risks and promote financial stability.

Bank resolution

The process of dealing with a failing bank to minimize impact on the economy. Effective governance involves planning and executing resolutions transparently and in alignment with regulatory requirements.

Bank run

A situation where many depositors withdraw their funds simultaneously due to fears of the bank's insolvency. Effective governance involves measures to prevent bank runs through transparency and maintaining depositor confidence.

Bank two-tier board

A governance structure with a supervisory board and a management board. Good governance ensures that both boards operate effectively, independently, and in alignment with regulatory requirements.

Bank-centered system

A financial system where banks play a central role in financial intermediation. Effective governance in such systems ensures transparency, risk management, and regulatory compliance to maintain stability.

Banking crises

Periods of severe financial instability in the banking sector. Effective governance involves managing risks and implementing strategies to prevent and mitigate the impact of banking crises.

Banking fragmentation

The division of the banking market into smaller, less connected segments. Good governance involves managing fragmentation to ensure financial stability and efficient market operations.

Banking union

An EU initiative aimed at centralizing banking supervision and resolution. Effective governance involves participating in the banking union to enhance stability and regulatory compliance.

Bankruptcy

A legal process for companies unable to meet their debt obligations, involving reorganization or liquidation. Governance during bankruptcy focuses on fair treatment of creditors and stakeholders, and the orderly restructuring or winding down of the company.

Banzhaf index

A measure of voting power in decision-making bodies. Effective governance uses the Banzhaf index to understand and balance the influence of different stakeholders in corporate decisions.

Basel

International banking regulations developed by the Basel Committee on Banking Supervision. Effective governance ensures compliance with Basel standards to enhance risk management and financial stability.

Basel II

Previous international banking regulations focused on risk management and capital adequacy. Effective governance involves maintaining compliance with Basel II while transitioning to newer standards.

Basel III

A set of international banking regulations aimed at improving bank capital requirements and risk management. Good governance involves ensuring compliance with Basel III to enhance financial stability.

Bayesian persuasion

A method of influencing beliefs using Bayesian probability. Effective governance involves using data-driven approaches like Bayesian persuasion to support informed decision-making and transparency.

Behavioral bias

Systematic deviations from rational decision-making. Good governance includes recognizing and mitigating behavioral biases to support objective and fair decision-making.

Behavioral decision research

The study of how psychological factors influence decisions. Effective governance uses insights from this research to improve decision-making processes and reduce biases.

Behavioral economics

The study of how psychological factors affect economic decisions. Good governance involves incorporating behavioral economics to understand and mitigate irrational behaviors in financial decisions.

Behavioral finance

Studies how psychological factors affect financial decision-making. In corporate governance, understanding these behaviors helps in designing policies and practices that mitigate irrational actions and align decisions with shareholders' interests.

Belief heterogeneity

Differences in beliefs among stakeholders. Good governance involves recognizing and addressing belief heterogeneity to ensure inclusive and balanced decision-making.

Benchmarking

Comparing performance against industry standards or best practices. Effective governance uses benchmarking to identify areas for improvement and implement best practices.

Beneficial ownership

The true ownership of shares or assets, often hidden behind nominees. Effective governance ensures transparency in disclosing beneficial ownership to protect stakeholders and prevent conflicts of interest.

Benefit corporation

A legal status for companies that balance profit with social and environmental goals. Good governance involves integrating these goals into business strategies and reporting transparently on progress.

Berle-Dodd debate

A discussion on whether corporations should focus solely on shareholder value or broader social responsibilities. Effective governance considers both perspectives to balance profit with social impact.

Berle-Means

Refers to the separation of ownership and control in corporations. Good governance addresses the challenges identified by Berle and Means by aligning management actions with shareholder interests.

Berle-Means corporation

A company characterized by the separation of ownership and control. Effective governance ensures that management acts in the best interests of shareholders despite this separation.

Bid/ask spread

The difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept. Effective governance involves ensuring transparent and fair trading practices to protect investor interests.

Bidding theory

The study of strategic behavior in bidding situations. Effective governance involves applying bidding theory to optimize outcomes in auctions and competitive negotiations.

Big four

The four largest accounting firms (Deloitte, PwC, EY, KPMG). Good governance involves selecting reputable firms from the Big 4 for audits to ensure high standards of transparency and accountability.

Big data

The vast volume of data generated by digital activities. In corporate governance, big data analytics enhances decision-making, risk management, and strategic planning by providing deeper insights into market trends and operational performance.

Big three

Refers to the three largest asset managers (BlackRock, Vanguard, State Street) and their influence on corporate governance through significant shareholdings, advocating for best practices, and engaging in shareholder activism to promote long-term value.

Bilateral trade

Trade agreements between two countries. Good governance ensures that bilateral trade is conducted transparently, ethically, and in compliance with international regulations.

Biodiversity

The variety of life in a particular habitat or ecosystem. Corporate governance includes integrating biodiversity considerations into environmental policies and sustainability initiatives to protect ecosystems.

Biodiversity finance

Funding initiatives aimed at conserving biodiversity. Effective governance involves managing biodiversity finance transparently and aligning with environmental goals and regulatory requirements.

Black-Scholes option pricing model

A mathematical model for valuing options. Good governance ensures that option pricing models are applied accurately and transparently to support fair and informed decision-making.

Blasius

A legal standard from the Blasius Industries, Inc. v. Atlas Corp. case, emphasizing the protection of shareholder voting rights. Good governance involves ensuring compliance with such legal standards to protect shareholder interests.

Blended finance

Combining public and private funding to achieve social or environmental goals. Effective governance involves managing blended finance transparently and ensuring alignment with strategic and ethical objectives.

Block holders

Large shareholders with significant influence over a company. Good governance ensures that block holders' actions align with the interests of all shareholders and promote long-term value creation.

Block pricing

The pricing of large blocks of shares. Effective governance involves ensuring that block pricing is transparent and fair, protecting the interests of all shareholders.

Block trades

Large transactions of securities negotiated privately. Good governance ensures that block trades are conducted transparently and align with regulatory requirements to protect market integrity.

Blockchain

A decentralized digital ledger technology that enhances transparency, security, and efficiency in recording transactions. In corporate governance, blockchain can improve accountability and traceability in areas like supply chain management and shareholder voting.

Blockholder

A shareholder with a significant block of shares. Effective governance ensures that blockholders act in the best interests of all shareholders and promote long-term value.

Blue sky laws

State securities laws designed to protect investors from fraud. Good governance ensures compliance with blue sky laws to maintain transparency and protect investor interests.

Board

The group of individuals elected by shareholders to oversee the management and operation of a company. The board ensures the company is run in the best interests of shareholders, setting strategic direction and monitoring performance.

Board committees

Sub-groups of the board responsible for specific areas, like audit or compensation. Good governance involves ensuring that board committees are independent, competent, and effective in their oversight roles.

Board composition

The mix of skills, experience, and diversity on the board. Good governance ensures that board composition supports effective oversight, decision-making, and strategic direction.

Board decision making

The process by which the board makes strategic and operational decisions. Effective governance involves ensuring that board decision-making is transparent, informed, and aligned with the company’s goals.

Board discretion

The authority of the board to make decisions on behalf of the company. Good governance ensures that board discretion is exercised ethically, transparently, and in the best interests of all stakeholders.

Board diversity

The inclusion of diverse members on the board. Effective governance involves promoting board diversity to enhance decision-making, represent different perspectives, and improve organizational performance.

Board dynamics

The interactions and relationships among board members. Good governance involves fostering positive board dynamics to ensure effective collaboration, decision-making, and oversight.

Board effectiveness

The ability of the board to fulfill its responsibilities effectively. Good governance involves evaluating and enhancing board effectiveness through training, performance assessments, and best practices.

Board elections

The process of selecting board members through shareholder voting. Effective governance ensures that board elections are transparent, fair, and allow shareholders to choose qualified and independent directors.

Board entrenchment

The tendency of board members to remain in position for extended periods, potentially resisting change. Good governance involves mechanisms to prevent entrenchment and ensure board refreshment.

Board evaluation

The assessment of board performance and effectiveness. Effective governance involves regular board evaluations to identify areas for improvement and ensure accountability.

Board expertise

The specialized knowledge and skills of board members. Good governance ensures that the board has the necessary expertise to provide effective oversight and strategic direction.

Board governance

The system by which the board operates and oversees the company. Effective governance involves establishing clear roles, responsibilities, and processes to ensure the board functions effectively and transparently.

Board independence

The presence of directors who are free from conflicts of interest. Good governance ensures that the board includes independent directors to provide unbiased oversight and protect stakeholder interests.

Board insulation

Measures to protect the board from external pressures. Effective governance balances board insulation with accountability, ensuring that the board can make independent decisions while remaining responsive to stakeholders.

Board interference

Undue influence on the board by external parties. Good governance involves protecting the board from interference to ensure independent and objective decision-making.

Board members liability

The legal responsibilities and potential risks faced by board members. Effective governance involves providing indemnification and insurance to protect board members while ensuring they fulfill their duties ethically and responsibly.

Board models

Different structures and frameworks for board governance. Effective governance involves selecting and implementing a board model that aligns with the company’s strategic goals and regulatory requirements.

Board networks

The connections and relationships between board members and external stakeholders. Effective governance involves leveraging board networks to enhance strategic insights and opportunities while managing potential conflicts of interest.

Board neutrality rule

A principle that the board should remain neutral in takeover situations. Good governance involves adhering to the neutrality rule to ensure fair and transparent decision-making during takeovers.

Board overlap

The occurrence of board members serving on multiple boards. Effective governance involves managing board overlap to prevent conflicts of interest and ensure focused oversight.

Bond markets

Multiple marketplaces for issuing and trading bonds. Good governance ensures that bond markets operate transparently, efficiently, and in compliance with regulatory standards.

Bond rollover

The process of replacing maturing bonds with new issuances. Good governance ensures that bond rollovers are managed transparently and strategically to maintain financial stability.

Bond spreads

The difference in yield between different bonds. Effective governance involves monitoring bond spreads to assess market conditions and inform strategic financial decisions.

Bondholders

Investors who hold bonds issued by a company or government. Good governance ensures that bondholders' interests are protected through transparent, ethical, and compliant financial practices.

Bonding hypothesis

A theory suggesting that companies commit to higher standards of governance to access global capital markets. Effective governance involves adhering to these standards to enhance credibility and investor confidence.

Bookbuilding

The process of generating and recording investor interest in a new securities issue. Effective governance ensures that bookbuilding is transparent, fair, and results in accurate pricing of the securities.

Bootstrap acquisitions

Acquisitions financed with minimal cash by leveraging the assets of the acquired company. Good governance ensures that such acquisitions are strategically sound and managed transparently.

Breakthrough rule

A regulation that allows shareholders to override certain protective measures during takeovers. Effective governance involves applying the breakthrough rule to ensure fair treatment of shareholders.

Breakup fee

A fee paid by one party to another if a merger or acquisition is not completed. Good governance ensures that breakup fees are reasonable, transparent, and protect the interests of all parties involved.

Bribery Act 2010

UK legislation aimed at preventing bribery and corruption. Good governance involves ensuring compliance with the Bribery Act 2010 to maintain ethical standards and protect the company’s reputation.

Broker non-vote

When a broker does not vote on certain proposals because they lack instructions from the beneficial owner. Effective governance ensures that broker non-votes are managed transparently and do not undermine shareholder democracy.

Broker voting

The process by which brokers vote on behalf of their clients. Good governance ensures that broker voting is conducted transparently and aligns with clients’ interests and instructions.

Brown-spinning

A term that may refer to questionable practices in financial markets. Effective governance involves identifying and mitigating such practices to ensure transparency and ethical conduct.

BRRD

Bank Recovery and Resolution Directive, an EU framework for managing bank failures. Good governance ensures compliance with BRRD to enhance financial stability and protect stakeholders.

Bunching analysis

A statistical method used to identify behavioral responses to tax or regulatory changes. Effective governance involves using bunching analysis to inform policy decisions and ensure compliance.

Bundling

The practice of selling multiple products or services together. Good governance ensures that bundling is conducted transparently and aligns with consumer protection regulations.

Business groups

Networks of firms under common control with complex ownership structures. Corporate governance in business groups focuses on ensuring transparency, managing conflicts of interest, and aligning the interests of the parent company and subsidiaries.

Business judgment rule

A legal principle protecting directors' decisions if made in good faith and with due care. Good governance involves ensuring that the board’s decisions comply with the business judgment rule to protect against legal liability.

Business restructuring

Reorganizing a company’s operations, structure, or finances. Effective governance involves managing restructuring processes transparently and strategically to enhance efficiency and achieve long-term goals.

Business Roundtable

An association of CEOs advocating for public policy. Effective governance involves engaging with such organizations to promote policies that enhance corporate responsibility and stakeholder interests.

Busy directors

Board members who serve on multiple boards. Effective governance involves managing the commitments of busy directors to ensure they can fulfill their responsibilities effectively.

But lucratif

French for "for-profit." Good governance involves ensuring that for-profit organizations operate transparently, ethically, and in alignment with their financial and strategic objectives.

Buyback

The repurchase of a company’s own shares. Effective governance ensures that buybacks are conducted transparently and strategically to enhance shareholder value and maintain financial health.

Buyout funds

Investment funds that acquire companies or significant stakes. Effective governance involves managing buyout funds transparently and aligning their actions with long-term value creation.

Buyouts

Acquisition of a company or its controlling stake, often involving significant changes in management and strategy. Corporate governance ensures that buyouts are conducted fairly, transparently, and in the best interests of all shareholders.

Bylaw

A rule governing the internal affairs of an organization. Good governance involves ensuring that bylaws are clear, comprehensive, and aligned with the company’s strategic objectives and regulatory requirements.

C