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October 03, 2002
IRRC to Release Corporate Governance Rating Tool
    by William Baue

The Investor Responsibility Research Center will launch a new scoring system for evaluating and benchmarking corporate governance performance.


Yesterday, the Investor Responsibility Research Center (IRRC) announced its plans to release a tool that will objectively rate corporate governance. IRRC is teaming up with New York City-based TrueCourse to create a scoring system for corporate governance. TrueCourse is a financial research firm that provides information to defend against takeovers. The firm will tailor its Shark Repellent technology, which compiles information on a company's mechanisms for defending against takeovers, to develop a searchable web database that will allow clients to analyze and benchmark a company's corporate governance performance.

"We have followed TrueCourse since they conceived of Shark Repellent about 18 months ago and were very impressed both with the product itself and the way TrueCourse does business," said IRRC CEO Linda Crompton. "It has been obvious to us for a while that we should be developing some kind of governance product, so when mutual clients started suggesting that we talk, we did and ended up deciding that this would be a nice partnership."

A wide range of potential users expressed interest in using such a corporate governance evaluation tool for several purposes. For example, institutional investors are seeking to assess the degree of responsible corporate governance practiced at the companies they are invested in, according to Ms. Crompton. Corporate counsel wants to identify leading edge thinking on governance requirements, and companies want to see how their own corporate governance performance compares to competitors.

IRRC and TrueCourse's product is distinguishable from its competitors.

"The big differences between what is currently available and what we intend to do is, first, the degree of transparency and disclosure we intend to have: no black boxes, no mysterious computations, and results will be replicable and easy to understand," Ms. Crompton told SocialFunds.com. "The second difference is the use of advisory panels to identify the variables contained in the product along with appropriate weightings, ensuring that it is the market itself that is designing this product. And lastly, there is no opportunity anywhere for conflict of interest, with no consulting services being sold back to corporations and no mandatory training programs, just objective research and scores."

Corporate
Governance and Public Policy ArticlesTrueCourse is designing the product to allow clients to choose the weightings of individual factors in order to come up with a customized score that reflects the client's value framework. Social investors may find this aspect appealing when comparing this tool to more standardized corporate governance rating tools. IRRC's reputation for impartial and objective research also enhances the appeal of this tool.

"In an era of governance ratings overload, the key isn't who has the most data, it's who has the most objective data," said TrueCourse President Jim Sussmann. "Our process will help establish industry standards based upon extensive market participation. Our products will provide insight and give members of the investment community what they need when they need it."

 

 
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