Technically Accurate, Practically Misleading: The Governance Problem Investors Face

In this short series, I’m examining how investors assess governance and risk when commonly relied-upon disclosures don’t tell the full story.

Formal commitments and workforce data can be technically accurate and still fail to reflect how issues are handled in practice — from the use of NDAs to the limits of employee engagement metrics.

Investors are often aware that obtaining reliable, decision-useful information about workplace culture is difficult — but less clear on how to act when the available data is incomplete or constrained.

Culture does not show up cleanly in financial statements or standard disclosures. It is shaped by incentives, power dynamics, and internal reporting structures — all of which influence what information reaches management, boards, and ultimately investors.

• Incentives shape behaviour

• Behaviour determines what gets reported, escalated, or suppressed

• What gets surfaced shapes the data investors rely on to allocate capital

When incentives reward silence, stability, or short-term optics, disclosures can be technically compliant and still misleading.

From an investor perspective, the challenge is not evaluating stated commitments. It is determining whether governance systems surface reliable information about how the organization actually operates — or systematically filter it out.

At that point, the focus shifts from what is disclosed to whether the underlying information is reliable, complete, and allowed to surface — and how investors assess leadership and governance when it is not.

This is where investor stewardship can play a critical role, shifting from values expression to a practical response when information gaps persist.

In practice, this often means moving beyond process toward governance tools and broader information-gathering, including:

• Direct dialogue with employees, former employees, unions, and other stakeholders where appropriate

• Triangulating company disclosures with external reporting, regulatory actions, and stakeholder feedback

• Engagement with boards and senior management

• Escalation pathways when concerns are not addressed

• Proxy voting on directors and committee chairs

• Votes on compensation structures and incentive design

• Voting on disclosure-related proposals

Used intentionally, these mechanisms allow investors to test oversight, signal expectations, and assess whether governance systems are capable of surfacing and addressing risk — particularly when internal data is incomplete or constrained.

In the coming weeks, I’m going to walk through a series of case studies, starting with Wells Fargo’s 2016 sales-practices scandal, to examine how incentive design, information suppression, and governance failures shaped what investors could — and could not — see, and what those lessons mean for capital allocation decisions today.

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Third part in a multi-part series on human capital, governance systems, and decision-useful information for investors.

Next post:

In the coming weeks, I’ll be walking through a series of concrete case studies that illustrate how incentive design, information suppression, and governance failures shape what investors can — and cannot — see.

These will include:

• Wells Fargo’s 2016 sales-practices scandal

• IBM’s age discrimination case and workforce restructuring practices

• BP’s Deepwater Horizon disaster, as an example of safety risks that were visible — but not acted on

Together, they show different ways that technically compliant disclosures and formal systems can fail to surface or respond to material risk — and what investors can learn about governance, incentives, and capital allocation as a result.