More Enron Fall-out - Corporate Governance Ratings | AccountingWEB

More Enron Fall-out - Corporate Governance Ratings

In another wave of post-Enron fall-out, GovernanceMetrics International (GMI), a new rating agency, released its first report of corporate governance rankings covering the S&P 500. Several established rating agencies are expected to follow suit in 2003 by issuing similar rankings.

GMI says its initial subscribers include institutional investors, including mutual funds, money management firms and pension funds. But its ratings have also attracted the interest of corporations, law and accounting firms, insurance underwriters, regulators and others. The rating reports summarize a company's overall governance profile and provide commentary on seven broad categories of analysis:

  • Board Accountability
  • Financial Disclosure and Internal Controls
  • Shareholder Rights
  • Executive Compensation
  • Market for Control
  • Ownership Base and Potential Dilution
  • Reputational and SRI Issues

GMI Chief Executive Gavin Anderson reportedly said that, in some ways, the GMI ratings get at the core of how honestly a business is run.

Five companies in the S&P 500 tied for GMI's top score. These companies are Johnson Controls Inc., MBIA Inc., Pfizer Inc., SLM Corp., and Sunoco Inc. Many companies received below-average scores, including Dell Computer Corp., Fannie Mae, Freddie Mac, Goldman Sachs Group Inc., Nike Inc., Sears Roebuck & Co., Walt Disney Co., Tyco International Ltd., Wal-Mart Stores Inc., and Dow Jones & Co. ("GovernanceMetrics Debuts New Corporate Governance Ratings," Wall Street Journal, December 3, 2002)

According to the Journal, other firms and organizations are expected to release competitive corporate governance ratings in 2003. In addition to Moody's and Standard & Poor's, the governance raters include proxy advisory service Institutional Shareholder Services, which began publishing its "corporate governance quotient" for individual companies earlier this year, and Investor Responsibility Research Center, a Washington, D.C., proxy research firm.

Wait, there's more!
There's always more at AccountingWEB. We're an active community of financial professionals and journalists who strive to bring you valuable content every day. If you'd like, let us know your interests and we'll send you a few articles every week either in taxation, practice excellence, or just our most popular stories from that week. It's free to sign up and to be a part of our community.
Premium content is currently locked

Editor's Choice

WHAT KIND OF FIRM ARE YOU?
As part of our continued effort to provide valuable resources and insight to our subscribers, we're conducting this brief survey to learn more about your personal experiences in the accounting profession. We will be giving away five $50 Amazon gift cards, and a $250 Amazon gift card to one lucky participant.
This is strictly for internal use and data will not be sold
or shared with any third parties.