The Importance of Corporate Governance in Cannabis Companies

Every year the Globe and Mail’s Report on Business ranks governance of Canada’s corporate boards in the “Board Games“. In the recently published 2018 edition, the boards of directors of 242 companies and trusts in the S&P/TSX index were assessed. The companies are awarded points for various categories, namely, board composition, shareholding and compensation, shareholder rights, and disclosure. Companies with more stringent governance policies in place are awarded higher points. For example, a company with 2/3 independent directors will be awarded more points for that category than a company that has the majority of its directors being related directors. Notably, three of the companies in the bottom 10 of the Board Games are cannabis companies. Why strong corporate governance is important for cannabis companies Oftentimes, investors are more tolerant of less mature companies (such as cannabis companies) lacking good corporate governance. These…

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