A new examination of companies viewed as corporate governance laggards shows that governance may indeed matter when it comes to corporate performance and behavior.
New data by GovernanceMetrics International shows that companies the firm relegated to the bottom of the governance barrel over time were more likely than well-governed companies to restate earnings or to otherwise be caught in regulators' cross-hairs over accounting.
"There does appear a strong correlation between governance and performance," said Gavin Anderson, President and CEO of the New York firm. Investors who scale back poorly governed companies in their stock portfolios are "in all probability going to do better."
GMI's research is the latest to yield a link between governance and performance. Even before the financial scandals that rocked the market starting with the fall of Enron Corp., academics and institutional investors scrambled to establish such a connection. More recently, proxy advisors and governance rating firms like GMI have joined in the effort.
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