UK - Corporate governance directly affects shareholder ret-urns, a new study in the US shows.
Institutional Shareholder Services – the National Association of Pension Funds’ US partner in the corporate governance ad-vice and proxy voting service RREV – commissioned the res-earch to measure how returns reflect how firms are run.
The study – carried out by Georgia State University – found a direct correlation bet-ween governance with shareholder returns, profitability, risk and dividend policy.
Study author Lawrence Brown said weaker governance performance meant less profitability and higher volatility.
He said: “The average difference in annualised returns between bottom decile and top decile companies was 11.9% over the preceding five-year period. Board composition proved to be the most important factor.”
Research found that top corporate governance performers had a three-year total shareholder return of 6.5% compared to -0.2% for those ranked in the bottom decile.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.