In its ‘Global Investor Opinion Survey’ of 200 institutional investors undertaken in 2000, McKinsey found that 80% of the respondents would pay a premium for well-governed companies. They defined a well-governed company as one that had mostly outside directors, undertook formal evaluation of its directors, and was responsive to investors’ requests for information on governance issues. The size of the premium varied by market, from 11% for Canadian companies to around 40% for companies where the regulatory background was least certain (in Morocco, Egypt and Russia).
Other studies have linked broad perceptions of the quality of companies to superior share price performance. A study of five-year cumulative returns of Fortune’s survey of ‘most admired firms’ found that those «most admired» had an average return of 125%, whilst the ‘least admired’ firms returned 80%. In a separate study Business Week enlisted institutional investors and ‘experts’ to assist in differentiating between boards with good and bad governance and found that companies with the highest rankings had the highest financial returns.
