Corporate Governance has always been assessed by ratings agencies such as Standards and Poor's by other names such as organization and control, board's activities such as performance measurement for CEO's, or whether strategic/key decisions are made without CEO involvement. Rating agency analysts increasingly scrutinize the effectiveness of coporate governance and while no shared standards exist there are exchange listing standards that describe desired corporate governance actions.
"Linkages between governance and credit quality can be real, but often indirect...At Standard and Poor's, governance issues are examined by credit ratings analysts in the context of assessing a company's management quality, accounting, and financial controls." --Governance and Risk an Analytical Handbook for Investors, Managers, Directors & Stakeholders; George Dallas, Managing Director Standard and Poor's Governance Service, McGraw Hill; 2004.
Many companies listed on the NYSE need to comply with certain corporate governance standards as codified in Section 303A of the NYSE listing standards.
Director qualification standards. These standards should, at minimum, reflect the independence requirements set forth in Sections 303A.01 and 303A.02. Companies may also address other substantive qualification requirements, including policies limiting the number of boards on which a director may sit, and director tenure, retirement and succession.
Director responsibilities. These responsibilities should clearly articulate what is expected from a director, including basic duties and responsibilities with respect to attendance at board meetings and advance review of meeting materials.
Director access to management and, as necessary and appropriate, independent advisors.
Director compensation. Director compensation guidelines should include general principles for determining the form and amount of director compensation (and for reviewing those principles, as appropriate). The board should be aware that questions as to directors' independence may be raised when directors' fees and emoluments exceed what is customary. Similar concerns may be raised when the listed company makes substantial charitable contributions to organizations in which a director is affiliated, or enters into consulting contracts with (or provides other indirect forms of compensation to) a director. The board should critically evaluate each of these matters when determining the form and amount of director compensation, and the independence of a director.
Director orientation and continuing education.
Management succession. Succession planning should include policies and principles for CEO selection and performance review, as well as policies regarding succession in the event of an emergency or the retirement of the CEO.
Annual performance evaluation of the board. The board should conduct a self-evaluation at least annually to determine whether it and its committees are functioning effectively.
Critical Success Factors:
--Management documents its a approach to risk management in a policy which is approved by the Board of Directors --Board provides input into the corporate/government entities' risk appetite --Board effectiveness is routinely assessed (not individual Board members) --Audit Committee is highly effective and financially literate --Ethics policy is established, communicated and monitored --Adherence to a Governance listing standard like those promulgated in NYSE rule 303A such as Board Independence