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The Organization for Economic Co-operation and Development (OECD) recently released a very interesting document, “Corporate Governance Lessons from the Financial Crisis.�  This report concludes that:

“The financial crisis can be to an important extent attributed to failures and weaknesses in corporate governance arrangements. When they were put to a test, corporate governance routines did not serve their purpose to safeguard against excessive risk taking in a number of financial services companies. The risk management systems have failed in many cases due to corporate governance procedures rather than the inadequacy of computer models alone.�

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Purchase Coop and Credit Union Report: Counting on Canada's Coops

Purchase Credit Union Report: Advancing with DisctinctionPurchase Coop and Credit Union Report: Counting on Canada’s Coops

“The use of new technology to communicate with members and improve transparency is the single biggest governance practice change since the first national survey was conducted in 2004,” said Debra Brown, president and CEO of Brown Governance Inc. “We also found that since 2004, many more co-op boards have adopted formal board and committee charters, board and director evaluations, member surveys and focus groups, on-line governance and financial disclosure, and CEO position descriptions and delegations of authority.â€�
“The co-op sector is actively embracing the reform era of corporate governance, where directors are more than just representatives of members’ interests, but also bring specific attributes that enable them to actively govern the co-op,” added Carol Hunter, executive director of the Canadian Co-operative Association  “Co-ops are also more actively seeking board members with financial expertise and other specific skills.”

According to the report, the co-op boards could be doing more is in the area of community, social and environmental stewardship, as well as in promoting co-operative identity.

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From Global Proxy Watch:

Storm Protection:

A brace of new reports drives home the centrality of governance in today’s crisis. On Dec. 4 the Conference Board issued the first of a new series of studies on the oversight role of corporate boards, spelling out how directors can improve their oversight of risk management and executive remuneration. That was followed four days later by a Moody’s report called: Corporate Governance In The Credit Crisis: Key Considerations For Investors. It advises that “firms with strong corporate governance practices, particularly those with strong/independent boards, are more likely to weather the storm better than peers with weaker governance.� Expect a guidance alert, too, from the US National Association of Corporate Directors.

In an effort to increase governance understanding, Brown Governance has created a series of brief videos, featuring David Brown, discussing a variety of governance related topics.

If you have a topic you’d like to see discussed, please contact us with your suggestion and we may use it in a future video.

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From Global Proxy Watch, Vol XII No 9, Feb. 29 2008

Move aside, waffling academics. Econometric research released this week by the Association of British Insurers (ABI) is unequivocal: Good corporate governance is a driver of premium performance and higher stock prices over the long term, at least at UK plcs. In the past five years, well-governed UK companies posted 18% higher returns than those with poor governance, after adjusting for risk. Worst offenders—companies that breach governance guidelines every year—underperformed the average industry-adjusted return on assets by 3 to 5 percentage points a year. Plus, the long research time frame allowed ABI to unearth a find the equivalent of buried treasure: it takes two to three years after a company starts breaching until there is an impact on performance. Studies focusing on shorter timeframes may have missed the link. ABI statistics resolve the chicken-and-egg problem, too. They show better governance causing performance gains, and not the other way around. Expect Governance and Performance in Corporate Britain to help fortify institutional investors who see governance research as a profit enhancer and risk tool rather than a dreary cost center.

- ABI Report