Owner-Accountable
Corporate Board Rating ProjectOverview
The focus of this project is to develop a measurement scale that assesses the
connection that a corporate board has with its owners/stockholders. The
strength of that connection will relate to the owner's ability to speak to
organizational performance in terms of Ends and Organizational Limitations.
Organizational limitations are different than executive limitations, they are
the constraints that owners put on the board and organization. The
ultimate purpose is to provide stockholders with an index of the strength of
their voice
as owners. It is to be a measure of an owner-accountable board. Progress
August 23, 2003:
A request for input about this
project to members of IPGA
was made on August 13, 2003, and at this point, three members have
responded. Their helpful suggestions ranged from creating an workgroup at
the upcoming
IPGA Regional Conference in Chicago to additional resources and things to
consider.
Two financial consultants have agreed to help
with the initial steps and to provide brainstorming as the project moves ahead.
They have identified a number of stock classification models that might have
implications for the project. Those models are being reviewed for
strategies, approaches and technical components that might have an application to
this project.
The initial stocks selected to be audited as
pilots for
owner-accountable activity fall into two groups. The first group are the
top twenty-five most highly traded stocks listed on the Dow over the
past six months. The second group are those that are mentioned or
recognized as being owner-responsive. These are arbitrary choices and have
been selected to get a feel for the data and behavior of boards.
About half
of the first group, the highly traded stocks, have been sent a request for
information. At this point, we are waiting for a response. It may be
necessary to become a stockholder to get the information that we desire, and if
so, that will be pursued.
A second piece of this project is to provide a
resource for those that would like to seek out other information on
Owner-Accountability in Corporate Governance. A list has been started on
the Corporate
Owner-Accountability Resource page. It will contain websites,
publications, stock indexes, stock activists, and other helpful information.
September 25, 2003:
The following four major criteria have been identified as central activities
that a board would exhibit if it were owner-accountable. Currently, a
behavior based scale is being developed for each of these criteria. These
scales will then be applied to a set of publicly traded stocks, consisting of
the 25 most widely held stocks and the 25 most widely traded stocks.
- Owner Identification and
Linkage Process
- Owner Feedback Loop
- Ends Development and
Monitoring
- Limitation Development and
Monitoring
This rating system is
about owner-accountability rather than Policy Governance. There is more to
Policy Governance than connecting with the moral owners. Even at the
Limitation level, this system is more interested in the owner's definition of
unacceptable performance.
It has also been recognized that the score of
this rating system will not promise nor seek to identify stocks that provide
higher returns. The rating will be neutral to higher returns. Its
purpose is judge how well the organization delivers the owner's expectations, of
which return may only be one component. It should identify stocks that
owners have a voice that makes a difference.
An initial survey of publicly traded stocks,
suggests that few of them will rank highly within the ratings.
October 6, 2003:
The core set of publicly traded stocks
have been identified. They can be found on the
Corporate Board Rating page. These
corporations are now being contacted to assess the availability of information
that will determine their owner-accountability.
January 14, 2004:
Few corporate boards responded
to our inquiries and little evidence was given in their annual reports or other
documentation about their approach to owner-accountability. In response to
the lack of available information, an additional direction is being pursued.
Other stock rating scales may assess the connection to owners. We are now
reviewing the range of scales and their interest in owner-accountability. |