How does Wall Street impact corporate governance?

The relationship between Wall Street and corporate governance is complex and multi-faceted. On one hand, Wall Street can provide the capital that corporations need to grow and expand, which can be beneficial to both the corporation and its shareholders. On the other hand, the pressure to meet Wall Street's short-term financial expectations can lead to decisions that prioritize the interests of shareholders over other stakeholders, such as employees and the community.

One way that Wall Street can impact corporate governance is through the use of proxy voting. Institutional investors, such as mutual funds and pension funds, often hold large blocks of shares in publicly traded corporations. These investors have the right to vote on important issues, such as the election of board members and executive compensation. By exercising their voting rights, institutional investors can influence corporate governance decisions.

Another way that Wall Street can impact corporate governance is through its emphasis on quarterly earnings reports. Analysts and investors closely monitor these reports to gauge a corporation's financial health and make investment decisions. The pressure to meet or exceed earnings expectations can lead to short-term thinking and a focus on maximizing shareholder value at the expense of other stakeholders.

Wall Street can also impact corporate governance through the use of stock options and other forms of executive compensation. In order to attract and retain top talent, corporations often offer executives lucrative compensation packages that are tied to the company's stock price. This can incentivize executives to take actions that boost short-term stock performance, even if those actions are not in the best long-term interests of the corporation.