Last night, the New York Society of Security Analysts hosted a conference on corporate governance at Bloomberg headquarters. Speakers included Patrick McGurn of Institutional Shareholder Services, Nell Minow of The Corporate Library, Howard Sherman of GovernanceMetrics International, and Jack Zwingli of Audit Integrity.
These firms are in the business of monitoring, measuring, and ranking companies based on various corporate governance criteria. They presented evidence showing that companies that get into trouble are often the ones that have bad corporate governance practices. They argued that corporate governance ratings can help money managers monitor their portfolios and reduce risk.
Of course, their services aren't cheap. Yet the cost may be worth it to those who follow a long term buy-and-hold strategy and to those who take large positions in any one stock. But I'm not convinced this is a useful investment tool for shorter-term investors--especially those who follow momentum-based trading strategies. Nonetheless, it was an interesting conference. Corporate governance ratings are now available through Bloomberg.
