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Corporate governance: one size does not fit all
What the world’s differing approaches to tipping, giving the thumbs-up and taking off your shoes can tell investors about corporate governance
Cultural nuances shape everything we do – including investing. Leave a tip worth less than 20% of your bill in the US and you may annoy your waiter; in Japan, tipping can be considered rude. In Turkey, a tut simply means ‘no’; in Britain it can be an expression of repressed rage. Across much of the Middle East, you should try to avoid showing the soles of your feet. If you’re visiting a friend in Korea, however, remember to remove your shoes at the door.
Try not to give a ‘thumbs-up’ in Iran – or in Thailand. In India, rejecting food offered by your host may seem disrespectful; in Sweden, you might not be offered food at all. For global travellers, the potential for cultural misinterpretation is endless. The same dangers apply to investors. Attempting to apply governance checklists formulated in one market to a quite different social and business context can be a mistake.
With over 40 years of experience investing globally, we’ve encountered a wide range of regional differences. Understanding these nuances is essential to understanding investment context. So why does the investment community assume that, when it comes to corporate governance, a one-size-fits-all approach is appropriate?
The Western model is not always the best model
The Western model of corporate governance tends to prioritise:
- Shareholder primacy.
- Disclosure and transparency.
- Independent, diverse boards.
- Separation of the roles of chair and chief executive.
- ‘One share, one vote’.
- Scepticism toward takeover defences (like poison pills).
- ‘Efficient’ capital structures (using debt to maximise shareholder returns).
It's not that these characteristics are wrong, per se. It’s just that they’re not always relevant. Viewed through the Western lens, companies in the US, UK, Australia, and Singapore often score highly, while those in India, China, Taiwan, and the Philippines score poorly, despite – in our experience – being fertile grounds for long-term investors.
We’re sometimes asked: “Why do you invest in India when governance is so poor?” It’s a simple question but it requires a nuanced answer. Yes, governance challenges do exist in India. But instances of poor corporate governance can be found anywhere in the world. We wouldn’t invest in the majority of companies in India – but then we wouldn’t invest in most companies in most markets. We believe the risks arising from poor governance are equally distributed across markets worldwide. India is home to some of the best-run companies in the world, businesses that are focused on creating value over the long term for both society and their shareholders.
Governance always needs to be understood in context rather in the abstract
The Western assumption that disclosure automatically leads to transparency, and that transparency implies integrity, is flawed. There are numerous examples in corporate history where companies received accolades for their governance, only to later be exposed for fraud; in 2000, Chief Executive Magazine selected Enron as a company with one of America’s best boards.1 By the end of 2001, it had declared itself bankrupt after systematically manipulating and mis-stating its accounts. Moreover, it doesn’t always follow that because a company tells its shareholders what it’s doing then those actions are in their best long-term interests. Equally, a lack of disclosure doesn’t always indicate poor governance or bad intentions. This could stem from cultural differences in communication and expectations, a lack of awareness about what shareholders are looking for – or simply because certain disclosures may not be relevant to the company’s operations.
Take China: while its governance is often labelled opaque, many Chinese companies are surprisingly transparent, providing that you know how to read and interpret their reports and you understand the context in which they operate. In Taiwan, meanwhile, disclosure may be weak but it is relatively easy to hold candid conversations with company leaders.
Corporate governance isn’t simply a ‘nice to have’ – it is the foundation of long-term investing. But it needs to be understood in context. Transparency alone doesn’t make a company well-governed and governance cannot be judged by a checklist. Aggregate scores across countries or sectors often miss the mark. Equally, timeframes matter. What is right for a company’s short-term shareholders might not necessarily be in the best interests of its long-term investors. So some of the most important questions investors can ask are about alignment: how are management, owners and its other stakeholders aligned? This is the bedrock of good governance.
We believe that governance structures can only be truly understood by getting to know the people who own and manage the companies we invest in – and the cultures that surround them. For long-term investors, understanding local conditions is essential to assessing governance quality. No matter what you do – whether you’re tipping, tutting or visiting a friend – local context matters.
Oliver Campbell
August 2025
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