GovernanceMetrics
International
FOR IMMEDIATE RELEASE: |
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GMI Launches Ratings on Australia’s ASX50
Governance generally good but concern over related-party transactions
have cross shareholdings
New York, June 9th, 2003 GovernanceMetrics International(GMI), an independent corporate governance ratings agency today announced ratings of the constituent companies of Australia’s ASX50 index.
GMI rates companies on a scale from one to ten. Of the ASX50 companies, one, CSR Limited, received the highest rating of 10, while Woolworths scored a 9.5. GMI regards these as having governance profiles that are well above average.
Gavin Anderson, GMI’s Chief Executive Officer, said: “We score companies relative to each other; they are not scored against some theoretical gold standard. It is important therefore to note that while a company may score a 10, it should not be taken to mean that it is perfect, but rather that its governance is better than others in the same universe. Nonetheless, the overall governance profile of top Australian companies is strong compared to most other markets. An interesting feature, however, is the presence in this index of complex entities such as Dual Listed Companies, “Stapled Securities Trusts” and Listed Property Trusts. The listed property trust in particular presents governance challenges in that shareholders own the underlying asset but have limited control over how it is managed because of restricted voting rights and limits on disclosure.”
The main positive factors that GMI noticed in the top-ranked Australian companies were a high level of disclosure, significant separation of executive and chairman roles and a preponderance of boards with independent directors. What was troubling, though, was the amount of related-party transactions. Eighty five percent of the ASX50 companies had related-party transactions in the last three years. These are levels that are astounding by US or UK standards. Significant too was the fact that in only 21 of the companies was there disclosure of a policy of board scrutiny of these transactions.
GMI conducted its Australia rating project in collaboration with Corporate Governance International, a Sydney-based governance advisor. GMI offers a web-based subscription service and its ratings are used by pension funds, money managers, mutual funds and companies. The firm was founded in April 2000 and published its first ratings on the S&P 500 last December. Ratings on the Nikkei 225 companies were released last month.
GMI is the only independent corporate governance ratings agency focusing on corporate accountability issues on a global scale. Its ratings are based on 600 data points per company and cover seven broad categories of analysis. Ratings criteria are based on a number of well-regarded global corporate governance codes, including those developed by the Organisation for Economic Cooperation and Development (OECD).