GovernanceMetrics International

GMI was formed in April 2000 by a small group of people who recognized the need for a new, easy-to-use tool to monitor corporate governance.

Our premise is straightforward: companies that emphasize corporate governance and transparency will, over time, generate superior returns and economic performance and lower their cost of capital. The opposite is also true: companies weak in corporate governance and transparency represent increased investment risks and result in a higher cost of capital. Events of the last few years, including those at Enron, Worldcom, and others, support this thesis, as does a growing body of academic research and financial market surveys. And while the spotlight started with U.S. companies, this is not just a U.S. problem. Similar corporate debacles have occurred recently in Canada, Germany, Italy, Sweden, Switzerland, South Korea and The Netherlands, to mention a few.

The problem for investors is how to measure governance practices across a large universe of companies, irrespective of domicile, in a cost-efficient way. While companies with weak governance structures and practices are the subjects of newspaper headlines, there are as many companies with outstanding governance policies and disclosure levels that go unrecognized. GMI's ratings hope to correct that. Subscribers to our service receive an independent and dispassionate evaluation of the governance characteristics of each company in our research universe.

Our rating model has been developed following extensive research in multiple markets and consultations with institutional investors, corporate officers and directors and governance specialists and is updated annually. Our scoring algorithm has also been tested and validated by outside statistical experts and is patent pending.

GMI Ratings for 4,322 companies, including complete coverage of the MSCI World and MSCI EAFE Index, are now available on a subscription basis. Subscriptions include two logins and are based on geographic region, as follows:

- North American coverage includes complete coverage for companies in the TSX 60 (Canada), S&P 500, S&P MidCap 400, S&P SmallCap 600 and Russell 1000 Index.

- Industrialized Asia-Pacific includes coverage of the S&P/ASX 100 (Australia and New Zealand), S&P/ASX 200 (Australia and New Zealand), Hang Seng (Hong Kong), Nikkei 225 (Japan) and STI (Singapore) Index.

- Industrialized Europe includes a total of 1001 companies, including complete coverage of the following market indices: ATX (Austria), BEL 20 (Belgium), OMXC20 (Denmark), OMX Helsinki 25 (Finland), CAC 40 (France), DAX (Germany), ATHEX 20 (Greece), ISEQ 20 (Ireland), FTSE MIB (Italy), AEX (Netherlands), OBX (Norway), IBEX 35 (Spain), OMXS30 (Sweden), SMI (Switzerland), FTSE 350 (UK) and the Dow Jones STOXX 600, plus coverage for additional companies in Israel and Portugal.

- Emerging Markets covered by GMI include a total of 688 companies from 21 countries: China, India, Indonesia, Malaysia, Philippines, South Korea, Taiwan and Thailand (EM - Asia); Czech Republic, Hungary, Poland, Russia and Turkey (EM - Europe); Egypt, Morocco and South Africa (EM - Middle East and Africa); and Brazil, Chile, Colombia, Mexico and Peru (EM - Latin America). GMI's emerging market coverage includes those MSCI Emerging Market Index companies with a free float market capitalization of at least $1 billion.

For smaller investors and analysts who need coverage for a limited range of securities, GMI offers customized portfolio coverage. Customized coverage is based on a minimum of 15 companies and can include any company from any region, market sector or industry that has been rated by GMI.

For corporations, advisory firms, security analysts and others whose interests are geared to specific types of businesses rather than geographic region, GMI offers market sector-based subscriptions. Available sectors include: Automobiles & Parts, Banks, Basic Resources, Chemicals, Construction & Materials, Financial Services, Food & Beverage, Healthcare, Industrial Goods & Services, Insurance, Media, Oil & Gas, Personal & Household Goods, Real Estate, Retail, Technology, Telecommunications, Travel & Leisure and Utilities. GMI also offers subscriptions for 41 specific industry groups within these sectors. Please contact GMI for a list of available industry groups.

All subscribers are able to hone their analysis by using GMI's filtering tools to isolate ratings for all companies within specific industry groups for a selected country, index, region or globally. Subscribers also receive regular updates on corporate governance developments at each company rated by GMI allowing them to track changes, both positive and negative, at GMI-rated companies in a single location.

GMI rating criteria are based on securities regulations, stock exchange listing requirements and various corporate governance codes and principles. Among the latter are principles promulgated by the OECD, the Commonwealth Association for Corporate Governance, the International Corporate Governance Network and the Business Roundtable. In addition, we have sought the views of various corporate governance and legal advisors, institutional investors, corporate officers and company directors, and utilized the combined experience of the founding partners.

This endeavor has produced a set of hundreds of metrics structured in a manner that can only produce yes, no or not disclosed answers. In this way we have attempted to eliminate a large degree of subjectivity to answer these metrics from official company filings with securities regulators and stock exchanges.

The GMI research process starts with a review of all pertinent public data, including regulatory filings, company websites, news services and other specialized websites. All data collected by GMI are entered into a relational database. Once the research template answers have been compiled and have been subjected to various quality control checks, data entry reports are sent to each company in our universe for a final accuracy check.

After any company adjustments are made the data are locked and GMI runs a scoring model that calculates and assigns ratings to each company. Companies are scored on a scale of 1.0 (lowest) to 10.0 (highest) and are always scored relative to the other companies in our research universe. Companies are assigned 14 ratings in all. The first are GMI global ratings. Global ratings are designed to demonstrate how each company's governance profile compares to all others in the GMI universe. Global ratings include an overall GMI score and separate scores for each of GMI's six research categories. Each company rated by GMI also receives "home market" ratings that reflect how well its governance policies and practices compare to others in its home country or region. Home market ratings also include an overall GMI score and separate scores for each of GMI's six categories of analysis. Using this approach, subscribers are able to focus their analysis to either single-market or cross-border portfolios.

Please contact us if you would like to see a copy of GMI's standard research categories and sample metrics.

GMI uses a proprietary scoring algorithm to produce its ratings. The GMI research template is divided into six broad categories of analysis. These categories are further divided into sub-sections. Each individual metric has a numerical value and each sub-section and research category is weighted according to investor interest.

We look at the individual metric scores as building blocks that when tallied demonstrate a company's governance architecture. Further, we do not have "litmus tests". We recognize that no one indicator is a litmus test of the governance profile of a company - we are trying to get an overall picture.

Having said that our system does utilize asymmetric geometric scoring (AGS) which in effect magnifies the record of "outliers". This includes both those with the very best practices - who are then rewarded more - or those with the worst - who are penalized accordingly.

Last, our scores are relative. We have chosen to score each company against the universe of companies measured and also against all those in the same country of domicile. In effect we're calibrating the scores against the real world of competitors for investor capital.

The principal management executives are Richard A. Bennett, Chief Executive Officer, Kimberly Gladman, Director of Research and Risk Analytics, Shauna Morrison, Vice President Operations and Howard Sherman, Executive Director and Head of Global Business Development. GMI research analysts include experienced professionals with backgrounds in portfolio management, securities analysis, corporate law, proxy analysis, investor relations, credit analysis, board evaluation services and academic research. Many hold post-graduate degrees.

Richard Bennett
Rick Bennett is Chief Executive Officer of GMI. Previously CEO of The Corporate Library, LLC, part of the GMI group of businesses, Rick has an extensive background in politics and government service as well as a wide range of private sector experience, including the founding and management of several businesses. He worked as Director of Corporate Governance for Lens Investment Management from 1997 to 2002. A former president of the Maine State Senate, Rick served four terms in the Maine Senate and two terms in the state's House of Representatives. He has served since 2009 on the Board of Governors of the International Corporate Governance Network.

Kimberly Gladman, Ph.D
Dr. Gladman oversees GMI's research practice and leads a group of analysts responsible for governance ratings. Before joining GMI's predecessor, The Corporate Library, in 2008, she managed a team of associates researching global corporations at Domini Social Investments, a leading socially responsible investment fund manager. She also served as Lead SRI Analyst for Domini's European equity fund, and spent several years participating in the firm's shareholder advocacy on social, environmental, and governance issues. Before joining Domini in 2001, Dr. Gladman had an academic career, focused on interdisciplinary research and teaching. She earned a B.A. from Yale University in 1990, and a Ph.D. from New York University in 2001. Dr. Gladman also holds the Chartered Financial Analyst designation.

Shauna Morrison
Shauna Morrison serves as VP of Data and Editorial Operations. Prior to GMI, Shauna served as Vice President of Business Development and Marketing at Z-CARD and Vice President of Content for The College Board, where she was responsible for managing the association’s website, producing student and parent collateral as well as managing data collection for and production of College Board student guides as well as various data collection efforts for College Board’s AP, CLEP, Membership and other programs. From 1984 through 2000, Ms. Morrison served various roles at Standard & Poor’s including Vice President of Operations, Retail Investor Services, Editor-in-Chief of PersonalWealth (online investment site for brokers and individual investors) and Publisher of S&P Stock Reports, MarketScope and MarketScope Europe as well as other professional products and publications. She was a member of S&P’s Index Committee and held NASD Securities licenses 2 and 65, as a registered investment advisor during her tenure at Standard & Poor’s. Ms. Morrison holds a BA from Duke University.

Howard Sherman
Howard Sherman is Executive Director and Head of Global Business Development. He spent 12 years with Institutional Shareholder Services (ISS), the world's largest proxy voting service, including three years as president and CEO. He is also the former CEO of Thomson Financial Investor Relations and held prior positions with the Investor Responsibility Research Center and the Federal Reserve Board.

Please call + 1 212 949 1313 or email us for more information about GMI products and services. You can also write us at: GovernanceMetrics International, Inc., One Exchange Plaza, 55 Broadway, 11th Floor, New York, NY 10006.