The 2017 Good Governance Report
The Good Governance Report is the IoD’s flagship corporate governance publication which ranks the UK’s largest listed companies 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
Now in its third year, the 2017 Good Governance Report was compiled for the IoD by Cass Business School, and examines a range of factors relating to how companies are run, including board diversity, directors’ pay, how long the business has been with an auditor and whether they have a whistleblowing policy.
The number of measures examined has been expanded this year to give an even more comprehensive view of how well the company performs for its shareholders, employees and customers. Uniquely among indices of this type, the IoD’s report combines publically-available data with over 2,000 rankings of the companies given by individuals with knowledge of what good governance looks like, including members of the IoD and the CQI, company secretaries and accountants. The final ranking is weighted based on the perceptions of the different measures, with audit and risk being seen by governance experts as the most important.
The size of the company seems to have no effect on the position in the 100 companies studied, and the top-ranked business come from a range of different sectors, with the insurer Aviva and the engineering firm GKN coming in second and third place respectively. Overall, energy companies outperformed compared to the average score, while IT companies underperformed. The IoD’s intention in producing the report is to encourage companies to consider a wide range of factors when doing a health check of how well their board and executive are functioning.