According to studies by McKinsey & Co., institutional investors are willing to pay a 12 percent to 14 percent premium for well-governed companies in North America and Western Europe. At Registered Rep.'s request The Corporate Library (TCL) has prepared a list ranking broker/dealers, asset managers and financial services companies that it follows.
The Corporate Library, the independent investment research firm, founded in 1999 by Nell Minow and Robert Monks, employs 30 financial and legal researchers, and tracks more than 2,100 companies. Relying on mostly public filings and databases, these researchers have developed a means to quantify the governance risk of investing in specific publicly held companies.
Here's a small sampling of the information contained in each company's listing, last updated at the end of the third quarter:
The company's state of incorporation can have a major impact on a U.S. company's business charter and takeover defenses.
Its overall rating — a letter grade ranging from A (highest) to F (lowest) — is the weighted average of eight categories where TCL evaluates each company, including board composition, CEO compensation, shareholder responsiveness, accounting, strategic decision-making, litigation & regulatory problems and takeover defenses.
Individual letter grades for CEO compensation, board composition and accounting, currently the most heavily weighted categories.
One-, three- and five-year total returns.
Annual audit-specific fees paid, plus total fees paid to the company's independent auditor.
The chairman's age, tenure and whether that person is also CEO or a former CEO, in some cases an especially important indicator.
Whether the board is “classified,” elected to staggered terms rather than all directors being subject to annual re-election. This is a key measure of shareholder “friendliness.”
Total number of directors.
Dominant shareholder percentages and dominant shareholder names, based on voting percentages, reflecting each company's basic ownership profile.
These indicators are used to help determine “which boards are most likely to enhance and preserve shareholder value and which boards might actually increase investor risk,” explains Minow, chairman of TCL.
|COMPANY NAME||STATE OF INCORPORATION||OVERALL RATING||CEO COMP||BOAR D COMPOSITION||ACCOUNTING||1-YEAR RETURN||3-YEAR RETURN||5-YEAR RETURN||CHAIRMAN IS||CLASSIFIED BOARD||DIRECTORS TOTAL||DOMINANT SHAREHOLDER VOTING %||DOMINANT SHAREHOLDER|
|Wells Fargo||Del.||F||F||F||B||10.96||32.76||76.67||current CEO||No||15|
|Eaton Vance||Md.||F||D||C||B||26.77||57.44||114.65||current CEO||No||7||100.00%||Eaton Vance Voting Trust|
|Gabelli Asset Management||N.Y.||F||D||D||A||7.93||26.05||84.04||current CEO||No||10||96.98||Mario Gabelli|
|Bank of America||Del.||D||D||F||C||12.05||42.89||142.90||current CEO||No||17|
|J.P. Morgan Chase||Del.||D||F||C||C||-5.39||16.16||-8.68||current CEO||No||16|
|American Express Company||N.Y.||D||D||D||A||4.53||50.14||5.83||current CEO||No||12|
|Morgan Stanley||Del.||D||F||C||B||1.40||28.57||-31.33||current CEO||No||11|
|Merrill Lynch||Del.||D||D||D||B||3.17||40.67||1.30||current CEO||Yes||11|
|Lehman Brothers||Del.||D||D||D||A||32.89||61.52||114.33||current CEO||Yes||10|
|Bank of New York||N.Y.||D||C||F||C||0.51||-7.67||-29.89||current CEO||No||13|
|Franklin Resources||Del.||D||C||D||B||58.65||87.76||165.04||former CEO||No||12||32.90||Charles B. Johnson and Rupert H. Johnson, Jr.|
|Charles Schwab Corporation||Del.||D||B||F||C||18.23||2.39||-64.62||current CEO||Yes||11||19.37||Charles Schwab|
|Bear Stearns||Del.||D||D||D||A||24.41||73.77||158.35||current CEO||No||12|
|E*TRADE Financial||Del.||D||D||B||F||0.25||1.56||-0.15||an independent director||Yes||9|
|Calamos Asset Management||Del.||D||F||A||B||n/a||n/a||n/a||current CEO||No||5||97.09%||Calamos Family|
|Value Line||N.Y.||D||B||D||B||11.39||44.66||59.74||current CEO||No||9||86.47||Arnold Bernhard & Co. owned by Jean Bernhard Buttner, chairman of the board, president and CEO of the company|
|Goldman Sachs||Del.||C||D||B||A||9.41||42.47||11.15||current CEO||No||11||13.20||The Shareholders' Agreement of Goldman Sachs Group|
|Mellon Financial||Pa.||C||C||D||B||0.34||-2.67||-11.94||current CEO||Yes||15|
|Legg Mason||Md.||C||C||D||A||72.50||220.28||217.57||current CEO||Yes||12|
|Chicago Mercantile||Del.||C||B||D||C||105.68||n/a||n/a||an independent director||Yes||20|
|BlackRock||Del.||C||C||D||A||27.76||86.12||184.31||current CEO||Yes||13||84.00||The PNC Financial Services Group, Inc. — Four of BlackRock's thirteen directors are directors and/or executive officers of The PNC Financial Services Group. As of Jan. 31, PNC indirectly owned approximately 70% of BlackRock's outstanding common stock, representing approximately 84% of its combined voting power.|
|Nuveen Investments||Del.||C||D||B||A||43.06||53.66||188.85||current CEO||No||7||78.00||The St. Paul Companies|
|Friedman Billings Ramsey||Va.||C||D||C||A||-20.62||40.38||119.80||current CEO||No||8|
|Group Jefferies Group||Del.||C||F||B||B||23.97||84.47||286.82||current CEO||No||5|
|Instinet Group||Del.||C||C||C||A||-0.76||-4.29||n/a||an independent director||Yes||11||61.90||Reuters Group|
|State Street||Mass.||B||B||C||D||-0.22||11.97||-4.08||current CEO||No||14|
|T. Rowe Price||Md.||B||C||B||A||25.95||97.35||55.53||current CEO||No||11|
|Ameritrade Holding||Del.||B||B||B||B||63.96||304.57||60.02||former CEO||Yes||8||21.50||J. Joe Ricketts, chairman and founder|
|A.G. Edwards||Del.||B||C||B||A||34.56||21.10||23.97||current CEO||Yes||7|
|Janus Capital Group||Del.||B||C||B||C||-8.55||-16.92||-64.75||current CEO||Yes||11|
|American Capital Strategies||Del.||B||C||B||B||39.54||62.50||106.83||current CEO||Yes||7|
|Federated Investors||Pa.||B||B||B||C||0.50||-10.07||34.43||an executive||No||7||100.00||Voting Shares Irrevocable Trust for the benefit of members of the family of John F. Donahue.|
|Investors Financial Services||Del.||B||C||B||B||-13.05||13.34||92.01||current CEO||Yes||7|
|Affiliated Managers Group||Del.||B||F||B||B||35.66||66.58||125.14||former CEO||No||7|
|Raymond James Financial||Fla.||B||C||B||A||7.98||53.21||96.97||current CEO||No||10||13.50||Thomas James|
|Waddell & Reed Financial||Del.||B||D||A||B||-13.61||-11.81||-36.10||an independent director||Yes||7|
|Greenhill & Co.||Del.||B||D||A||A||95.46||n/a||n/a||current CEO||No||7||25.40||Robert Greenhill family (see ‘Related Party Transactions in proxy’).|
|Morningstar||Ill.||B||A||B||B||n/a||n/a||current CEO||No||6||78.03||Joe Mansueto - founder, CEO and chairman|
|Investment Technology Group||Del.||B||C||A||A||64.35||-35.72||-20.23||current CEO||No||7|
|Piper Jaffray||Del.||B||C||B||A||-32.72||n/a||n/a||current CEO||Yes||8|
|LaBranche & Co.||Del.||B||B||C||A||-25.18||-71.44||-54.52||current CEO||Yes||6|
|SWS Group||Del.||B||A||C||B||14.90||-6.32||-37.92||former CEO||No||7|
|Ave. Total Return (as of June 30)||18.50||41.99||60.76||Average > 10.32||20.45% have a controlling shareholder.|
|S&P 500 (as of June 30)||11.78||46.64||71.67||S&P 500 > 10.86||In the S&P 500, only 2.4% have a controlling shareholder.|
|“Bad” Companies (D and F rated)||13.31||37.57||55.01||Only 8.65% of our entire coverage universe (2082 companies) have a controlling shareholder.|
|“Good” Companies (A, B, and C rated)||22.03||45.40||65.42|
|Source: The Corporate Library|
At Registered Rep.'s request, The Corporate Library has prepared a list of broker/dealers, asset managers and financial services firms, whose corporate governance they monitor. Companies are grouped according to overall corporate governance grade. There are four classes of companies ranging from those whose overall grade is an F to those earning a B. No firm gets an A for an overall grade, but several firms get highest honors for certain components, such as CEO compensation, board composition and accounting.