Glossary

As comprehensive glossaries for financial and business related terms see InvestorWords and BusinessDictionary.

 

 

Disruption. Fundamental change of business models and markets caused by simpler and cheaper products ousting more complex and expensive ones. Thus disruption is exclusive due to new rules and redistribution of resources and wealth, in contrast to stability, where cohesion is achieved through inclusive consideration of broader interests.

 

Equity Governance. Approach that pursues managing the equilibrium between customers, employees/suppliers and shareholders (‘micro view’) and considering economic rationality and corporate social responsibility as equal objectives of entrepreneurial behaviour (‘macro view’) for long-term oriented value creation by placing an emphasis on bringing the dialogue of management and board of directors to live.

 

Governance Arbitrage. Latent risk of economic loss from more or less obvious deficits of corporate governance caused by for example dispersed ownership (e.g. ‘principal-agent problem’), unidentified market inefficiencies (e.g. due to information asymmetry) or misjudgement and biases (e.g. over-optimism or loss aversion as judgement distortions or ‘anchoring bias’ as change barrier). The risk of ‘governance arbitrage’ increases with the moral hazard that an industry faces.

 

Materiality. A matter is material if it could substantively affect the organization’s ability to create value in the short, medium or long term (IIRC). ‘Material aspects’ are those that reflect the organization’s significant economic, environmental and social impacts; or that substantively influence the assessments and decisions of stakeholders (GRI).