Two groups - a joint venture between the Investor Responsibility Research Center and TrueCourse, and GovernanceMetrics International - will start issuing separate corporate governance scores for institutional investors.
The IRRC, Washington, and TrueCourse Inc., a New York financial research firm specializing in takeover defense intelligence, are working together to provide corporate governance scores by the start of the 2003 proxy season. Linda Crompton, IRRC chief executive officer, said they will initially score the companies in the Standard & Poor's 500, 400 and 600 indexes and eventually extend the scoring to other U.S. and non-U.S. corporations.
The venture is forming advisory panels of representatives from investor, corporate and professional organizations to help identify the corporate governance factors to be covered by the system and their weightings in the scores and the scoring scale. Ms. Crompton said she doesn't know if the IRRC will disclose the names of the panelists once they are selected. Clients will be able to manipulate the weightings of the factors to emphasize their own values and governance priorities, thus changing the companies' overall scores.
GovernanceMetrics International Inc., New York, plans to start making scores on the S&P 500 companies available to clients in November. It plans to extend the scores to thousands of companies globally within the next year, said Gavin Anderson, partner and CEO.
The company is raising additional financing through a private equity placement with institutional investors, Mr. Anderson said. He declined to disclose the amount or other details until the offering is closed later this month.
GMI was formed by five partners, including Howard Sherman, the company's chief operating officer; Mr. Sherman was a president and CEO of Institutional Shareholder Services Inc. The other partners are: Mr. Anderson, former chairman and chief executive officer of Gavin Anderson & Co., a corporate, financial and investor relations firm; Jon Lukomnik, a principal at Sinclair Capital, a consultant to institutional investors, and former deputy controller of New York City; Stephen Davis, president of Davis Global Advisors, a consultant on international corporate governance; and Gary Kraut, principal at G.A. Kraut Co. Inc., an investor relations consultant.
GMI will score companies on a scale of 1 to 10, using some 700 factors divided into seven categories: board accountability; remuneration; disclosure; anti-takeover provisions; shareholder rights; type of shareholder; and corporate behavior, including social policies on labor and the environment. GMI will give each company both an overall score and a score in each category.
GMI will sell score and analysis subscriptions to institutional investors at a basic annual rate of $18,000 and also offer to perform a more in-depth analysis for corporations for about $50,000. IRRC-TrueCourse, which hasn't priced its product yet, doesn't plan to sell such services to corporations to avoid potential conflicts of interest, said Ms. Crompton.
IRRC-TrueCourse and GovernanceMetrics will explore licensing opportunities for investment products based on the scores, including indexes, according to both Ms. Crompton and Mr. Anderson. Neither group has decided if it will publicize their scores of individual companies.