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The 2016 Good Governance Report

07 Sep 2016

The Good Governance Report (“The Good Governance Initiative”) is the IoD’s flagship corporate governance publication which publicly ranks the FTSE 100 based on their corporate governance performance.

This report sets out the findings from extensive research into the measurement of corporate governance in UK-listed companies. Its purpose is to encourage the study of good governance among UK companies and stimulates public debate on the importance of corporate governance in rebuilding the reputation of the UK business community.

The purpose of this project is to reignite the governance debate by leading it away from the compliance approach to corporate governance that has become widespread in recent years. Our novel approach is to combine traditional governance indicators with a measure of the quality of corporate governance as perceived by stakeholders. We follow two different approaches to measuring the corporate governance of a given firm:

  • We select a list of objective, measurable factors drawn from public sources
  • We conduct a survey of stakeholders perceptions of corporate governance

The combination of these two components allows us to understand the relative importance of different governance factors as perceived by stakeholders. We then use the estimated model to build an index of corporate governance.

The results indicate that different components of corporate governance have different impacts on practitioners' perceptions of it. 

In other words, our methodology shows that the naïve approach of giving equal weights to different indicators (often adopted in the past) is inappropriate. Surprisingly, measures of Board Effectiveness have little effect on the perceived quality of corporate governance of a company. This is probably due to the fact that Board Effectiveness is hard to measure and that simple compliance with the UK CG code is not enough to receive a high CG score as perceived by stakeholders. Measures of the quality of Audit and Risk/External Accountability are the most important determinant of the perception of good corporate governance, followed by Shareholder Relations, then by Remuneration and Reward, then Stakeholder Relations, in that order.

The study also confirms that there is no agreement across stakeholders about the definition of good governance. Although measures of the quality of Audit and Risk/External Accountability are important across all types of respondents, different types of respondents emphasise different aspects of CG. Customers care about Audit and Risk/External Accountability and Shareholder Relations. Suppliers and media care about Audit and Risk/ External Accountability. Investors and analysts care both about Audit and Risk/External Accountability and Stakeholder Relations.

Read full report here

Good Governance Report hub

We will soon be publishing revised corporate governance guidance for unlisted companies, expected by 2017.

Full Ranking

Rank Name Model Score
 1 British American Tobacco Plc
 793
 2 Unilever Plc  778
 3 Diageo Plc  775
 4 Sage Group Plc  769
 5  Next Plc  763
 6  Kingfisher Plc  762
 7  DS Smith Plc  761
 8  United Utilities Group Plc  758
 9  Royal Mail Plc  755
 10  Admiral Group Plc  755
 11  Royal Dutch Shell Plc  750
 12  RSA Insurance Group Plc  750
 13  Compass Group Plc  750
 14  Marks & Spencer Group Plc  750
 15  Smith & Nephew Plc  747
 16  Aviva Plc  746
 17  Intercontinental Hotels Group  745
 18  Vodafone Group Plc  744
 19  National Grid Plc  744
 20  Whitbread Plc  742
 21  Intertek Group Plc  740
 22  Reckitt Benckiser Group Plc  739
 23  ARM Holdings Plc  737
 24  Smiths Group Plc  737
 25  Capita Plc  736
 26  Merlin Entertainment Plc  736
 27  Severn Trent Plc  734
 28  Legal & General Group Plc  733
 29  Rightmove Plc  733
 30  Old Mutual Plc  733
 31  Standard Life Plc  731
 32  Experian Plc  731
 33  DCC Plc  730
 34  St James's Place Plc  729
 35  Astrazeneca Plc  729 
 36  Pennon Group Plc  728
 37  Lloyds Banking Group Plc  728
 38  BHP Billiton Plc  728
 39  Glaxosmithkline Plc  728
 40  BT Group Plc  727
 41  Croda International Plc  727
 42  Barratt Developments Plc  725
 43  ITV Plc  725
 44  Mondi Plc  724
 45  Intl Consolidated Airlines Group  724
 46  GKN Plc  724
 47  Rio Tinto Plc  724
 48  Hargreaves Lansdown Plc  724
 49  Imperial Tobacco Group Plc  723
 50  Coca-Cola Hbc Ag-Di  723
 51  Johnson Matthey Plc  722
 52  Rexam Plc  722
 53  Wolseley Plc  722
 54  Centrica Plc  720
 55  Burberry Group Plc  720
 56  RELX Plc  719 
 57  Persimmon Plc  719
 58  Ashtead Group Plc  717
 59  London Stock Exchange Group  715
 60  Inmarsat Plc  715
 61  Easyjet Plc  714
 62  Carnival Plc  713
 63  Babcock Intl Group Plc  711
 64  WM Morrison Supermarkets  711
 65  Glencore Plc  711
 66  Bunzl Plc  711
 67  Shire Plc  706
 68  Fresnillo Plc  706
 69  BAE Systems Plc  706
 70  Taylor Wimpey Plc  705
 71  Informa Plc  704
 72  3I Group  700
 73  Royal Bank Of Scotland Group  699
 74  BP Plc  694
 75  Direct Line Insurance Group  694
 76  HSBC Holdings Plc  693
 77  Standard Chartered Plc  691
 78  Randgold Resources Ltd  689
 79  SSE Plc  689
 80  Pearson Plc  687
 81  Schroders Plc  686
 82  Barclays Plc  686
 83  Antofagasta Plc  685
 84  Provident Financial Plc  683
 85  Sainsbury (J) Plc  681
 86  Auto Trader Group Plc  679
 87  Prudential Plc  678
 88  Hikma Pharmaceuticals Plc  675
 89  TUI Ag-Di  673
 90  Sky Plc  672
 91  Dixons Carphone Plc  671
 92  Worldpay Group Plc  665
 93  Sabmiller Plc  664
 94  Travis Perkins Plc  661
 95  Investec Plc  661
 96  WPP Plc  660
 97  Associated British Foods Plc  655
 98  Rolls-Royce Holdings Plc  648 
 99  Berkeley Group Holdings  641
 100  Tesco Plc  603

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