Low Risk Boards

News Corp got Andrew Dominguez and Eben Esterhuizen to thinking about why boards fail. They came up with the following:

  1. No Repercussions: Shareholder lawsuits don’t pose much of a threat to an incompetent board. Most U.S. companies incorporate in Delaware, where state laws exempt board members from financial liability for their actions.
  2. Poor Data: Some boards receive too little or too much information – or just plain bad information. This often occurs when a company’s management is trying to manipulate the board.
  3. Lack Of Time: It’s actually quite common for members to sit on the boards of several companies–which means they don’t have the time to properly fulfill their fiduciary duties.
  4. Lack Of Expertise: Board members don’t always have the same level of expertise as management, especially in highly specialized industries, making effective government all but impossible.
  5. Dual CEO / Chairman Role: It’s actually quite common for CEOs to act as the chairmen of their boards–but this gross imbalance of power also puts the company at risk.

With a little help from the MSCI RiskMetrics Group, they arrive at the following list of S&P 500 companies with top-ranked corporate boards in addition to positive audit, compensation, and shareholder rights metrics.

  1. Exxon Mobil Corporation (XOM).
  2. Apple Inc. (AAPL).
  3. Microsoft Corporation (MSFT).
  4. International Business Machines Corp. (IBM).
  5. Chevron Corp. (CVX).
  6. General Electric Co. (GE).
  7. Wal-Mart Stores Inc. (WMT).
  8. Johnson & Johnson (JNJ).
  9. AT&T, Inc. (T).
  10. Procter & Gamble Co. (PG).

Board Risk: List of Companies With Low Corporate Governance Risk, Business Insider, 7/27/2011. Compare with 14 Rallying Large Caps With Low Corporate Governance Risk, Seeking Alpha, 7/29/2011 also based on RiskMetrics Group data.

  1. Apple Inc. (AAPL).
  2. Microsoft Corporation (MSFT).
  3. International Business Machines Corp. (IBM).
  4. The Coca-Cola Company (KO).
  5. Philip Morris International, Inc. (PM).
  6. Schlumberger Limited (SLB).
  7. Intel Corporation (INTC).
  8. Amazon.com Inc. (AMZN).
  9. Starbucks Corporation (SBUX).
  10. Public Storage (PSA).
  11. General Growth Properties Inc. (GGP).
  12. El Paso Corp. (EP).
  13. Symantec Corporation (SYMC).
  14. Nordstrom Inc. (JWN).


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