How do you spot governance red flags when investing?
u/OptionsWheelTrader ·
Reddit — r/investing
· March 23, 2026 at 04:24
· ⬆ 20 pts
· 💬 4 comments
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I’ve been thinking about corporate governance risk after recent events with SMCI.
Company leadership and employees are often heavily incentivized with stock options, RSUs, etc. That could push them to chase revenues, margins, and short‑term metrics which can lead to shortcuts or even breaking rules.
For someone doing due diligence, what are the practical red flags to watch out for? Auditor resignations (as happened with SMCI before)? Insider selling (as a true indicator of underlying issues - how can one tell)? Opaque disclosures in filings or on calls?
I’d love to hear how others here evaluate governance risk before buying a stock, and what signals you use to avoid firms with poor oversight.