Corporate Governance links to performance

There is a good deal of media coverage on research that support the contention that boards with more female non-executive directors outperform their male director heavy peers.

Calvert Research and Management (Calvert) has extended their  investigation of the gender/corporate performance link.

Calvert examined 8,500 companies across 49 countries on the MSCI database on the basis of:

  • Individual company governance practices – a range of about 100 metrics applicable to 10 broad governance factors; and
  • A classification of the country governance rules – laws, exchange listing requirements and corporate governance codes (about 70 metrics).

For each company, ten governance factors were regressed against ROA, ROIC, P/E and P/B (controlling for country, market capitalisation and industry classification).

The research findings and interpretations provide an interesting and, at 3.5 pages, short read.

Consistent with our GECN Group research (see HERE), Australia is classified within the highest category (that is, as having strong company practices & strong governance rules). Board effectiveness and pay performance alignment are found to be financially material governance factors which impact performance (accounting risk being common across countries, i.e. a gateway factor).

The research provides a rationale towards integrating corporate governance assessments into investment and engagement decisions.

Access the Calvert publications HERE.

© Guerdon Associates 2024
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