Many market observers and investors believe that signs of poor corporate governance may be an effective risk indicator, providing early warning signs of other brewing problems. ISS’ Governance QualityScore (GQS), a decile ranking system based on a holistic assessment of companies’ governance practices, including board structure, compensation, shareholder rights, and audit, helps to quantify this risk. A score of 1 indicates the strongest governance practices (lower risk) while 10 suggests higher risk.
In this report, we examine four different gauges of market sentiment and compare them with GQS ratings. The first two – short interest ratios and credit ratings – are commonly accepted measures of perceived risk, while the other two are indicators of investor discontent as measured by vote support on director election and Say-on-Pay (SOP).
By:
Sandra Herrera Lopez, Vice President, Data Analytics Research, ISS-Corporate
Jun Frank, Managing Director, Global Head of Compensation & Governance Advisory, ISS-Corporate
Ramy Ibrahim, Associate Director, Product Manager, ESG, Data Analytics & Financial Solutions, ISS-Corporate
