Friday, April 14, 2006

Public spotlight on boards spurs improvement in corporate governance

While more posts on the executive compensation issues will follow,
this post is a brief aside.

Here's an interesting article I came across that underlines the role of media in spurring corporate governance improvements.
A recent paper by a trio of researchers at Arizona State, Penn State and Georgia State finds that companies which were named by Business Week as having the 'worst boards' subsequently went on to make improvements in their boards and corporate governance in general.

Given that it is a small sample study, the results are not dramatic, but are interesting nevertheless. 34 of 50 companies named as 'worst boards' went on to make some change. Given the percentage results, 27 appear to have replaced their CEOs, 10 separated the CEO and Chairman functions and 18 appear to have increased the number of outside directors (there is overlap among these categories: many companies have done two or three of these things).

Good to know that drawing attention to these practices pays off!

1 comment:

texan_0109 said...

"Good to know that drawing attention to these practices pays off! " .... But does it really change things in the company ?

Fine , they replace the CEO's etc.. But it's done in an effort to show the media they're trying to improve / they've sat up and taken notice .. Does it really improve things in the long run , though ?

When the spotlight's taken away from them , they go back to the way the were ...