corporate governance: what does it include and not include?

CFA Level I
#1

When I hear that term, I think “We the shareholders can vote you executives into power and trust that you won’t use the company’s funds for your own selfish purposes”. This might include:

  1. Mergers done solely to expand management’s sphere of influence

  2. Embezzling

For the purposes of the CFA exam, is corporate governance supposed to mean anything else (which might be subjective) such as “treating employees well” or “closing down factories that pollute the rivers”? Or does corporate governance simply mean that the leadership is increasing profits on behalf of shareholders?

#2

Social responsibility and environmental responsibility are certainly part of corporate governance.

#3

Okay but for the purposes of all 3 CFA exams, is this going to be tested? I feel like a professional organization would be afraid to test on topics like that because they could be subjective/political/controversial.

#4

Social responsibility and environmental responsibility are definitely testable at Level II; I don’t recall about Level I.