In 2007, there were three prominent corporate governance ratings firms-The Corporate Library (TCL), Governance Metrics International (GMI) and Institutional Shareholder Services (ISS). These companies assess the effectiveness and lack of governance systems of thousands of publicly traded companies. Although members of the investing public agree that sound policies were important to protect the interests of the shareholders of potentially self-serving managers, there were many questio … Read more »

In 2007, there were three prominent corporate governance ratings firms-The Corporate Library (TCL), Governance Metrics International (GMI) and Institutional Shareholder Services (ISS). These companies assess the effectiveness and lack of governance systems of thousands of publicly traded companies. Although members of the investing public agree that sound policies were important to protect the interests of the shareholders of potentially self-serving managers, there were many questions about the usefulness of the published governance ratings themselves. Questions ranged from whether a system of governance adequately in a single numerical value, a high or low rating should show, are summarized. In addition, allegations that ISS in a conflict of interest by selling consulting services to companies how they can improve their ratings committed some, led to the objectivity of the rating process in question.
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from
David F. Larcker,
Brian Tayan
Source: Stanford Graduate School of Business
12 pages.
Publication Date: Oct 15, 2007. Prod #: CG08-PDF-ENG
Corporate Governance Ratings: Got the grades, what was the test? HBR case solution

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