Corporate governance expert GMI rates companies according to their environmental, social, and governance policies; it has recently added accounting transparency to its ratings, too. If you own shares of one of the companies that GMI has rated poorest on these measures, you should consider heading for the exits and finding less risky stocks to invest in.
Yesterday, GMI released its Risk List, calling out 10 North American companies that have fallen to the bottom of the heap of its ratings. Here are the types of major corporate problems GMI targets:
- Board independence issues
- CEO compensation problems, including pay-performance disconnects
- Ownership structure issues, such as dual-class ownership structure
- Shoddy disclosure on environmental, health, and safety risks and policies
- Accounting transparency issues, including forensic accounting measures
Its latest controversy involves a News Corp. publication people actually tend to trust: The Wall Street Journal. In Europe, WSJ allegedly massaged its circulation numbers to court advertisers and arranged for editorial coverage of the companies it did business with. Dirty pool, and risky stock? You bet.
The for-profit education industry is no stranger to risk these days. Companies like Strayer Education
Check out the link for GMI's list in its entirety, and remember: Good corporate governance correlates with solid investment returns. When it comes to investing in companies that have exhibited deep governance problems, investors may later have to admit they were warned.
Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of Bridgepoint Education. Motley Fool newsletter services have recommended buying shares of Chesapeake Energy and writing puts on Bridgepoint Education. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.