Content area
Full Text
any Americans seem to love corporate beauty contests-the constant ranking, rating, and scoring of perceived company corporate governance progress, or lack thereof, and related aspects of evaluating boards and managements of publicly owned, private-sector enterprises. Beauty contests, some may pejoratively characterize these exercises, or at the opposite end of opinion, increasing numbers of investors see these exercises as rigorous attempts to better define and in some way quantify really effective governance. And to differentiate the best examples from too many examples of poor governance.
What must the view be from inside the boardroom looking out? Some directors maybe asking: Who generates these 'best of/worst of' lists and rankings? What criteria are used, and to whom do these things matter? The landscape may be seen as bewildering with the great range and variety of opinions being expressed (and widely circulated) by those outside the boardroom and C-Suite doing the judging of those inside the corporation.
As we have been detailing in the pages of this publication, over the last decade we have seen the emergence and continuing evolvement of evaluations of corporate performance with respect to three buckets of issues as represented in the framework of "ESG"-the environmental (E), including energy issues, social or societal issues (S), and corporate governance (G). These evaluations are of growing interest for mainstream asset owners and managers, including private equity, hedge funds, mutual funds, ETFs, and other investment pools. And of interest to non-market players who may be described as "corporate reputation influencers" as they assemble their rankings and ratings and lists of "best" and "worst" among publicly traded companies.
The concept of today's ESG frameworks and approaches evolved from somewhat different directions, and from the early 2000s onward, began to merge and evolve into a more comprehensive and definable framework for analysts and investors. After the spectacular financial misadventures of the Enron-era (featuring Enron, WorldCom, Global Crossing, Adelphia, Tyco, and later, Freddie Mac and Fannie Mae, and Lehman Brothers, and Bear Stearns), investors united in the quest for methods and methodologies to better evaluate and monitor corporate governance, as well as to define some of the outcomes of poor governance and oversight. (These issues are typically found in the laundry list of social and environmental concerns that are...