Poor governance lowers share price
Read Nicki Crauford's article in the NBR (11 April 2008). Companies that persistently flout corporate governance rules often make bad stock market investments.
Poor governance lowers share price
Companies that persistently flout corporate governance rules often make bad stock market investments. A recent study from the Association of British Insurers (ABI) tracked 14 companies that it had criticised at least twice over serious breaches of City boardroom guidelines. A common thread in the three-year survey was a lack or under-representation of independent non-executive directors. While the small sample size and predetermined sample character might suggest a lack of statistical robustness, the ABI argues the results point to a “strong link” between poor governance and poor share price performance.
State boards fall short...
Professional director Kerry McDonald has made some trenchant observations on the leadership and performance of the New Zealand public sector. While acknowledging a number of positive features, Mr McDonald was concerned about inadequate leadership, lack of attention to systems and organisational issues, poor policy design and implementation, weak administrative and operational performance, performance failures and poor results.
...and need to lift their game
In his view these weaknesses are the result of a lack of an integrated, co-ordinated and strategic “whole of government” approach to important social and economic issues and the failure of political and official leaders to address serious deficiencies. Moreover, poor performance is tolerated, notwithstanding its cost to the economy and living standards. Among many things, state sector boards are in a powerful position both to assess and provide leadership, to insist that operation and system issues are rigorously managed, to sanction poor performance and to recognise and enhance good performance.
Fewer CEOs serve as directors
The number of active chief executives on corporate boards has declined dramatically since 1990 as the tasks become too time-consuming, a recent study reports. Not only are fewer top executives joining outside boards, but those who do, serve on fewer boards. If the trend continues at the current rate, there will be no active CEOs of Fortune 500 companies on outside boards by 2016, according to a study by executive search and board recruitment firm James Drury-Partners.