That means the new president is expected — in first 100 days after the administration is installed – to move to broaden government-related provisions in the Troubled Asset Relief Program for banks and other financial institutions and apply them to a broader community. “We expect other longstanding proxy voting issues, like say on pay, to be required yearly and new rules for putting nominees on the proxy ballot could become mandates for all companies,” explains McGurn.
Of course, these are major changes on the legislative/regulatory front. “We also expect a broader national discussion to definitely provide a great deal of momentum for shareholder resolutions this season, and investor anger will fuel ‘just vote no’ campaigns against directors,” he adds. “We should see a bumper crop of this type of activity in 2009.”
Some companies with a strong track record in corporate governance are prepared.
“We have been focusing on this issue since before corporate governance became an official issue for public companies,” explains Ken Kenny, vice president and treasurer of Southwest Gas Corporation in Las Vegas. “As a company, we were definitely focused on it so that our shareholders were confident in our management team. And when the [Corporate Governance Quotient] ratings came out, we were rated extremely high given our history.”
“Some companies are now catching up with us in corporate governance as it’s been mandated in areas where we took action before,” Kenny says.
“We’ve always paid attention to corporate governance, from the way we elect our board members to how we do our Sarbanes-Oxley requirements, and we’ve always maintained good records, etc.,” he shares. “As more mandates came in, all we had to do was formalize certain processes. We started operations in 1931 and began trading on the New York Stock Exchange in 1979. We have a history of being concerned with earnings as well as with proper checks and balances.”
“We will continue to improve as needed,” Kenny concludes. “For our corporate governance score, we reelect our board members every year, in addition to meeting other criteria, and that is positive.”
In addition, companies that have controls in place give investors more comfort in today’s environment, experts say, in terms of understanding a company and its data.
According to RiskMetrics McGurn, “Recent problems point to some areas that were not fixed, like compensation, which was — in some cases — encouraging excessive risk taking and too short a focus.”
RiskMetric’s Corporate Governance Quotient looks at multiple factors and is thus a good barometer for measuring boardroom accountability. Strong scores should give shareholders some confidence, but they don’t fully replace good old-fashioned fundamental analysis. “CGQs can help find trouble spots that merit further inquiry,” McGurn shares.