Governance and performance
Filed in archive corporate governance by leon on February 28, 2008

More evidence that good governance delivers results.
Portfolios with companies that have good corporate governance
deliver 18% higher average share-price returns to investors than those without, according to a new survey from the Association of British Insurers. According to the survey, investing £100 ($US199) in the portfolio of well-governed companies yielded roughly £120 ($US238) by the end of 2007. Investing £100 in the portfolio of poorly-governed companies yields just £102 ($US203).The survey also found that when companies breached governance best practice, they reduced the industry-adjusted return on assets by 1 percentage point a year. And if they did it consistently, they would reduce it by 3 to 5 per cent.
One of the interesting findings relates to the number of non-executive directors. Having them on board improved performance but having too many decreased profitability.
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