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CORPORATE GOVERNANCE, FAMILY OWNERSHIP AND FIRM VALUE 769

Blackwell Publishing Ltd.Oxford, UK


CORGCorporate Governance: An International
Review0964-8410Blackwell Publishing Ltd. 2005
November 2005136769784CORPORATE GOVERNANCE,
FAMILY OWNERSHIP AND FIRM VALUE: THE CANADIAN
EVIDENCEPETER KLEIN, DANIEL SHAPIRO AND JEFFREY

YOUNG

Corporate Governance, Family


Ownership and Firm Value:
the Canadian evidence
Peter Klein, Daniel Shapiro* and Jeffrey Young

We analyse the relationship between firm value, as measured by Tobin’s q, and newly released
indices of effective corporate governance for a sample of 263 Canadian firms. The results
indicate that corporate governance does matter in Canada. However, not all elements of
measured governance are important, and the effects of governance do differ by ownership
category. For the entire sample of firms we find no evidence that a total governance index
affects firm performance. This is mainly because we find no evidence that board
independence, the most heavily-weighted sub-index, has any positive effect on firm
performance. Indeed, for family-owned firms we find that the effect is negative. In general,
sub-indices measuring effective compensation, disclosure and shareholder rights practices
enhance performance and this is true for most ownership types. We also find no evidence that
governance practices are endogenous.

Keywords: Corporate governance, governance rankings, board of directors, family firms, firm
performance

Introduction nance, set by securities law, corporate law,


stock exchange rules and behavioural norms
here has been increased public and
T academic discussion of issues related to
corporate governance in most countries with
is so widely accepted that there is little vari-
ance in governance practices among public
firms. Other recent surveys (Leblanc and
active capital markets. Both firms and regula- Gillies, 2003; Daily et al., 2003) also suggest
tors are considering how best to ensure good that there is at best mixed evidence in support
corporate governance. Oddly, however, there of the hypothesis that better corporate gover-
is no overwhelming evidence to suggest that nance results in better performance. Many of
within developed markets firm performance is the studies reporting a positive relationship
enhanced by better governance practices. Nor between corporate governance and firm per-
is there total agreement as to whether corpo- formance are for emerging markets (Bai et al.,
rate governance can be measured in a useful 2002; Campbell II and Keys, 2002; Klapper and
way. Love, 2004; Black et al., 2003; Durnev and Kim,
In his survey of the relevant literature, Black 2005).
*Address for correspondence:
(2001) concludes that inter-company differ- For the most part past studies have mea- Simon Fraser University, Har-
ences in corporate governance have no eco- sured corporate governance using very spe- bour Centre, Faculty of Busi-
nomically significant effect on market value or cific measures that typically reflect only a ness Administration, 515 West
Hastings Street, Vancouver,
performance of US companies. He suggests single aspect of governance (for example, BC, Canada V6B 5K3. E-mail:
that the minimum quality of corporate gover- board composition). Recently, however, insti- dshapiro@sfu.ca

© Blackwell Publishing Ltd 2005. 9600 Garsington Road, Oxford,


OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA. Volume 13 Number 6 November 2005
770 CORPORATE GOVERNANCE

tutions such as Standard and Poor’s and Gov- where ownership is dispersed, one expects a
ernance Metrics International (GMI, 2003) have positive relationship between measures of cor-
begun to collect more comprehensive meas- porate governance and firm performance,
ures of corporate governance (Bradley, 2004; other things being equal. If effective gover-
Sherman, 2004). GMI reports that company nance structures are clearly understood and
performance is in fact positively correlated can be easily imitated, then one might also
with its more comprehensive measures of cor- expect that any advantage of good governance
porate governance (http://www.gmiratings. would disappear over time, even when owner-
com). Recent academic studies that have ship is dispersed.
employed more general indices of governance However, recent evidence also suggests that
also report positive governance effects dispersed ownership is not the dominant
(Gompers et al., 2003; Manry and Strangeland, ownership form in most countries (La Porta
2003; Drobetz et al., 2003; Durnev and Kim, et al., 1999). In most countries, most firms are
2005). closely held, either by families or by other
This study contributes to the emergent liter- companies (themselves often controlled by
ature relating broad indices of corporate gov- families). Thus, La Porta et al. (1998) argue that
ernance to firm performance. We examine the the primary conflict in closely held firms is
relationship between firm performance, as between majority and minority shareholders,
measured by Tobin’s q, and newly released with the former having the potential to expro-
indices of corporate governance for 263 of the priate wealth from the latter. This phenome-
largest Canadian firms. The Canadian indices non is referred to as “tunnelling” (Johnson
have been compiled by the Globe and Mail, a et al., 2000). It is not clear whether measures of
Canadian newspaper, and published in its corporate governance affect performance in
Report on Business (McFarland, 2002). These the same way when ownership is not in
indices, described more fully below, measure general widely dispersed, and in particular
board composition and effectiveness, compen- when ownership is concentrated in the hands
sation policies, shareholder rights and disclo- of families (Corbetta and Salvato, 2004).
sure practices. They are summarised in an As a consequence, we distinguish among
aggregate corporate governance index (CGI), different ownership types in our analysis. We
which is computed as the sum of four sub- control for ownership type in our perfor-
indices. In our analysis, we therefore ask not mance equations, and we also provide sepa-
only whether corporate governance broadly rate estimates of the impact of governance
defined affects firm performance, but we also variables for each ownership type. We focus in
investigate whether some governance factors particular on family firms, the dominant
are more important than others. In this respect, ownership category worldwide, and widely
our paper contributes to the debate over prevalent in Canada. This study therefore con-
the measurement of corporate governance tributes to the body of research on the effects
(Tsipouri and Xanthakis, 2004). of corporate governance on firm performance,
Finally, this study also contributes to the as well as to the literature on the effects of
literature that examines the effects of corpo- family ownership.
rate governance in different institutional en- Our results indicate that corporate gover-
vironments (Gedajlovic and Shapiro, 1998, nance does matter in Canada. However, not all
2002; Denis and McConnell, 2003). Although elements of measured governance are impor-
Canada may be thought of as being similar to tant, and the effects of governance do differ by
the United States in terms of its national gov- ownership category. We find no evidence that
ernance structures, ownership concentration the total governance index affects firm per-
in Canada tends to be higher since individu- formance, regardless of ownership. This is
als, families or private holding companies mainly because we find no evidence that
effectively control many of the largest firms board independence has any positive effect on
(Roe and Lee-Sing, 1996; La Porta et al., 1998; firm performance. Indeed, for family-owned
Morck et al., 2000). In this regard, ownership firms we find that the effect is negative. In
in Canada more closely approximates owner- general, effective compensation, disclosure
ship structures observed in most countries and shareholder rights practices enhance per-
around the world (La Porta et al., 1999). formance and this is true for most ownership
The traditional agency-theoretic approach types.
to governance has emphasised the potential We also find that ownership type does not
conflict between unmonitored managers and affect performance in Canada. None of the
widely dispersed shareholders. Factors that variables that indicate ownership type is ever
increase the ability of shareholders to monitor statistically significant. In particular, we find
managers or to align incentives are therefore no evidence that family ownership affects per-
expected to improve firm performance. Hence, formance, a result somewhat different from

Volume 13 Number 6 November 2005 © Blackwell Publishing Ltd 2005


CORPORATE GOVERNANCE, FAMILY OWNERSHIP AND FIRM VALUE 771

recent US evidence that indicates that family resources and financial firms in the Canadian
firms may have performance advantages over Index is 67.7 per cent, of which financials com-
non-family firms (Anderson and Reeb, 2003). prise about half (33.7 per cent of the total); the
The study proceeds as follows. In the fol- comparable numbers for the US S&P Index are
lowing section we discuss the governance 30.8 per cent (of which financials comprise
indices employed in this study, as well as the 21.0 per cent of the total). In contrast, indus-
measures of ownership that are employed. trial, consumer product and IT firms consti-
We then present the empirical model to be tute 23.9 per cent of the Canadian Index and
estimated and discuss estimation issues, 49.2 per cent of the US Index.
notably the problem of endogeneity. The The overall corporate governance index
results are presented, followed by discussion (CGI), with a maximum value of 100, was
and conclusions. obtained by summing four sub-indices: (A)
Board composition, (B) Shareholding and
compensation policies, (C) Shareholder rights
Measuring corporate governance policies and (D) Disclosure policies. In com-
and ownership piling the overall index, the ROB weighted the
sub-indices as 40, 23, 22 and 15 per cent,
As corporate governance figures more promi- respectively. Each sub-index was in turn com-
nently in the concerns of investors, various prised of a series of factors with arbitrary
information providers have begun to publish weights. Details are provided in the Appen-
summary measures that allow the ranking of dix, Table A1.
firms according to their governance standards The board composition sub-index captures
(Bradley, 2004; Sherman, 2004). In Canada, the board autonomy, structure and effectiveness.
most comprehensive (in terms of firm cover- Autonomy is measured though various in-
age) index has been published by the business dices of board independence, including the
section of the Globe and Mail newspaper. The independence of the audit and compensation
index and its components are described below. committees. It should be noted that a stringent
A clear advantage of these measures is that definition of independence is employed that
they capture an unusually wide variety of rules out family members, suppliers or cus-
governance indicators; a clear disadvantage tomers as being independent. Independence
is that the list of measured variables and requires that members have no affiliation with
the weights attached to them are arbitrary. the company, its parent or any firm with which
In addition, the governance index does the company does business. This sub-index
not account for ownership concentration, also contains measures of whether the Chair
or ownership type, and we have calculated and CEO positions are split, and various
separate measures for these variables. measures of board effectiveness, including
the regularity of meetings. However, most
of the points in this category (at least 31 out
Corporate governance indices of 40) are allocated to measures that reflect
The Globe and Mail, Report on Business (ROB) board independence.
constructed the indices and published the Shareholding and compensation policies
results on 7 October 2002. The ROB developed comprise the second sub-index, the purpose of
the measures based on a “tough set of best which is to measure the degree to which man-
practices culled from the corporate gover- agers and the board have incentives that align
nance guidelines and recommendations of their interests with those of shareholders.
US and Canadian regulators, as well as Companies score higher in instances where
major institutional investors and associ- the CEO and directors are required to take
ations” (McFarland, 2002, p. B6). The data equity positions in the firm, and when they
were obtained from information the com- have in place systems that control or limit the
panies published in their most recent proxy use of stock options and low interest loans as
information circular for shareholders. The components of managerial remuneration.
ROB rated all but five of the firms in the The third sub-index measures shareholder
Canadian S&P/TSX Index at the beginning of rights. The major components are the exist-
September 2002. In all, 270 firms were ranked. ence of employee stock options and subordi-
For reasons related to data availability, our nate shares that dilute ownership and voting
sample numbers 263 firms. rights. Companies with highly dilutive option
Evidently, the composition of firms in the plans, especially those that were re-priced in
Index (and therefore in our sample) reflects the 2001 or 2002 and those with large gaps
nature of the Canadian economy, which is between voting control and equity owner-
structurally different from that of the United ship, scored poorly. To score well a company
States. For example, the share of natural had to be structured such that dual voting

© Blackwell Publishing Ltd 2005 Volume 13 Number 6 November 2005


772 CORPORATE GOVERNANCE

rights systems were absent and managers are widely held US companies. Most of the
were not unduly compensated at the expense remainder are held by financial institutions
of owners. and pension funds.
The final sub-index deals with disclosure. It Similarly, family control may be enhanced
attempts to measure a company’s public com- by the existence of dual class shares, and this
mitment to good governance. Companies that is relatively common in Canada (Amoako-
comply with OSC governance regulations, Adu and Smith, 2001). We therefore focused
name and explain related directors, provide on voting rights, and not equity ownership to
director biographies, disclose non-audit fees determine ultimate control. Thus some well-
paid to auditors and reveal director atten- known Canadian companies such as Magna
dance score well in this category. and Canadian Tire were classified as family
owned, even though families own less than 10
per cent of the equity.
Ownership The final sample comprised 123 widely held
Agency theory suggests that concentrated firms, and 140 not widely held, of which 84
ownership will result in more effective moni- were family-owned, 60 were owned by other
toring. Thus ownership should be an impor- companies or institutions, six were govern-
tant component of a corporate governance ment-owned and four were mixed. These
system. We compiled ownership information numbers illustrate the variety of ownership
for the 263 firms included in the Globe and Mail structures that co-exist in Canada.
governance index based on the Inter-Corporate
Ownership Directory published quarterly by Summary statistics
Statistics Canada (2002), and from individual
Summary statistics and correlation matrices
corporate SEDAR filings.
are provided in Table 1 for the entire sample
We first classified companies as widely
of 263 firms, and for a sub-sample of family
held or not, using a 10 per cent cut-off rule. If
firms. It can be seen that there is variation in
the final beneficial owner of any equity posi-
governance practices across firms, and that in
tion controlled 10 per cent or more of the vot-
general, family firms score less well on all
ing rights of any individual company, it was
measures. The differences are not statistically
classified as not widely held. Those compa-
significant. The sub-indices are positively
nies that were not widely held were then
correlated in the total sample, but not in the
classified according to the identity of the
sample of family firms. In general, firms that
owner. The result was five different owner-
score well on one sub-index also score well on
ship classifications: family, institutional/cor-
others. The correlation coefficients are high
porate, government, mixed and widely held.
enough to warrant caution in using them all
Any company that reported a shareholder
in a single regression equation. For family
that controlled 10 per cent or more of the vot-
firms, the correlation among the sub-indices is
ing rights was assigned to one of the first
lower, some of the signs are negative, and
three categories. In a few cases, all involving
some are not statistically significant.
government, we found two owners with
Figure 1 provides a histogram of the overall
shares of more than 10 per cent and these
index (CGI) scores. The index distribution is
were classified as mixed. A firm with no
skewed to the right, with a mean of 60.76, and
equity owners that controlled 10 per cent or
standard deviation of 14.05 and a skewness of
more of the voting rights was assigned to the
0.3067. As illustrated, the companies that score
widely held category.
below the mean tend to be concentrated and
La Porta et al. (1999) note the importance of
relatively close to the mean, whereas a more
ownership pyramids, whereby an ultimate
dispersed distribution is observed for compa-
owner maintains control over other companies
nies with scores on the right hand side of the
through indirect ownership. In effect, the ulti-
distribution. The shape of the left side of the
mate owner maintains voting control over
score distribution may be a result of the rela-
companies in the pyramid without significant
tively high level of corporate governance
cash flow rights. Although La Porta et al.
regulation in Canada, which acts as a barrier
(1999) indicate that pyramids are most impor-
to very low scores.
tant in emerging markets, they could be
important in Canada in some cases. We there-
fore took some care to determine that compa- Methodology and data
nies classified as “owned by institutions/
corporations” were not in fact really controlled Our primary interest is the relationship
by families. For example, about 25 per cent of between firm performance and the corporate
these companies are subsidiaries of foreign governance indices discussed above. We
(non-Canadian) firms, of which almost all therefore estimate a model in which firm

Volume 13 Number 6 November 2005 © Blackwell Publishing Ltd 2005


CORPORATE GOVERNANCE, FAMILY OWNERSHIP AND FIRM VALUE 773

Table 1: Means and correlation matrices, governance indices

Mean Standard Correlation coefficients


deviation
CGI BOARD COMP RIGHTS DISC

Total sample (n = 263)


C CGI 60.76 14.05 1.000
BOARD 25.10 8.69 0.845** 1.000
COMP 12.30 4.51 0.584** 0.233** 1.000
RIGHTS 16.96 4.34 0.497** 0.173** 0.175** 1.000
DISC 6.41 2.96 0.638** 0.472** 0.308** 0.497** 1.000
Family firms (n = 84)
C CGI 52.21 10.73 1.000
BOARD 19.73 7.65 0.771** 1.000
COMP 11.62 3.82 0.457** 0.081 1.000
RIGHTS 15.45 4.80 0.279** -0.188* -0.025 1.000
DISC 5.41 2.87 0.603** 0.424** 0.204* -0.090 1.000

CGI: Total Corporate Governance Index (maximum 100); BOARD: Board Composition Index (maximum
40); COMP: Compensation Policies (maximum 23); RIGHTS: Shareholder Rights (maximum 22); DISC:
Disclosure Policies (maximum 15).
Statistical significance at: ** 5% level; * 10% level.

35
No. of Companies

30
25
20 Frequency
15
10
5
0
e
0

15

25

35

45

55

65

75

85

95

or
M

CGI Score

Figure 1: CGI score distribution

performance, measured by Tobin’s q, is affect the calculation of Tobin’s q. These diffi-


regressed on the corporate governance indi- culties often cause researchers to eliminate
ces, as well as the ownership indicator such firms from their sample, but given the
variables, and various other control variables. composition of the S&P/TSX Index (and there-
Following Black et al. (2003), we included as fore our sample), discussed above, this would
control variables measures of firm size (Ln have meant that our sample would be reduced
assets), leverage (Debt/Equity Ratio), average by over 60 per cent. We therefore chose to
sales growth and profit variability. Firm size maintain sample size, but include the industry
and growth control for potential advantages dummy variables. Summary statistics for the
from economies of scale and scope, market continuous measures are found in Table 2.
power and market opportunities. The leverage Endogeneity of the governance variables
and the variance of profitability terms control presents a potential estimation problem (Black
for different risk characteristics of firms. et al., 2003). It was not always possible to
In addition, we added dummy variables for ensure that the performance variable (Tobin’s
companies in the utility, financial services and q) post-dated the governance variables, and
resource sectors. Unique government regula- so endogeneity remains an issue. Our ability
tion in the utilities industry, the special re- to estimate a fully-specified and identified
lationship between book and market values model in the presence of four governance
in the financial industry and the difficulty of sub-indices was limited by the availability
valuing reserves in the resource sector can of instruments for the governance variables.

© Blackwell Publishing Ltd 2005 Volume 13 Number 6 November 2005


774 CORPORATE GOVERNANCE

Table 2: Means and correlation matrices, selected variables

Mean Standard Correlation coefficients


deviation
Tobin’s q Firm size Leverage Growth Variance

Total sample (n = 263)


Tobin’s q 1.56 1.05 1.000
Firm size 20.97 1.91 -0.355** 1.000
Leverage 1.95 3.49 -0.278** 0.550** 1.000
Growth 2.76 33.98 0.104 -0.129* -0.033 1.000
Variance 1,168.43 11,177.49 -0.010 -0.056 -0.029 0.032 1.000

Tobin’s q: (Book value of liabilities plus market value of common equity), divided by the book value of
assets. Firm size: Natural logarithm of total assets. Leverage: Book value of debt divided by market value
of common equity. Growth: Average growth rate of sales over the past five years, or longest period available.
Variance: Variance of return on assets (ROA), 1999–2002.
Statistical significance at: ** 5% level; * 10% level.

Indeed, it is very difficult to find variables that Our empirical strategy was to test for the
might qualify as instruments. We did identify endogeneity of each of the governance vari-
two such variables. ables using either the foreign listing dummy
The first potential instrument is a dummy alone, the years listed variable alone, or both
variable indicating whether the firm was also variables as instruments. We employ the
traded on a US exchange. To the extent that Hausman specification test for endogeneity
foreign listing subjects the firm to increased (Ashenfelter et al., 2003, pp. 227–232), using as
governance scrutiny, it may be associated with exogenous variables firm size, leverage, firm
better governance practices. There is some evi- growth, variance of ROA, the sector and
dence that this may be the case (Lang et al., ownership dummy variables, plus one or
2003; Doidge, 2004). In fact, we found that two of the instruments defined above. In all
the dummy variable was not correlated with five cases (the total index and each of the four
Tobin’s q (r = -0.004), but was more highly sub-indices), endogeneity is rejected regard-
correlated with governance variables. For less of the number of instruments. In addition,
example, the simple correlation between the when either the foreign listing dummy vari-
total index and the foreign listing dummy able or the years listed variable (or both) is
variable was r = 0.148; similar values were included as an explanatory variable in the
recorded for the sub-indices. Dual listing is performance equation, neither is statistically
common in Canada; of the total sample of 263 significant, with t-statistics below unity, and
companies, 120 (46 per cent) were also listed their inclusion never alters the main (gover-
on US exchanges. nance) results.
The second potential instrument is years In implementing the Hausman tests, we do
listed on the TSX. Here we argue that firms treat ownership status as exogenous. There is
with a longer history on an exchange become evidence suggesting that this is not the case
more familiar with best practice governance (Demsetz and Villalonga, 2001). In order to
and so are more likely to accept higher gover- minimise this effect we measured ownership
nance standards. Likewise, information asym- in terms of the dummy variables defined
metry is reduced as investors become more above; the ability of firms to change owner-
familiar with the firm, and this limits the ship categories is restricted relative to the
ability of any firm to impose poor gover- ability to change ownership percentages. In
nance practices. In fact, there is a positive addition, we estimated the relevant equations
correlation between the aggregate governance for the largest ownership categories.
index and years listed on the TSX (r = 0.161). Thus, we use OLS estimation of Tobin’s q on
However, there is also a relatively strong the set of exogenous variables: governance
negative correlation between years listed and indicators, ownership dummy variables and
Tobin’s q (r = -0.107). This might reflect an financial variables. The sources of the gover-
age effect, whereby performance declines nance and ownership data were described
with age, but it might make years listed a less above. With the exception of market capitali-
effective instrument. sation information, which was included in the

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CORPORATE GOVERNANCE, FAMILY OWNERSHIP AND FIRM VALUE 775

ROB data, the firm financial data used in this of a sometimes statistically significant and
paper were taken from company balance sheet negative impact of mixed ownership on per-
and income statements, obtained from Globe- formance, we find no evidence that ownership
investor.com, an online investment website matters. It is true that the mean Tobin’s q for
affiliated with the Globe and Mail newspaper. family-owned firms is lower than the mean for
For each firm, the most recent financial state- the entire sample, and the difference is
ment was used to calculate the ratios used in statistically significant (assuming unequal
this study. Although 270 firms were ranked by variance). However, family firms are also on
the ROB, the absence of other data limits our average larger than other firms, and when size
sample to 263 firms. is accounted for the family ownership term is
Estimates were also obtained using alterna- never statistically significant. Family firms
tive performance measures, notably the ratio perform less well because they are larger, and
of market to book value and the ratio of mar- size is penalised. This finding stands in con-
ket value to sales. However, the results are not trast to the results in Anderson and Reeb
different from those reported below. For all of (2003).
the results reported below, regression resi-
duals were analysed to determine the possible
effects of outlying observations. We found no
such effects. For example, excluding the top Sub-index results
and bottom 5 per cent of residuals resulted in The results based on the total governance
no important changes in the results. index are somewhat misleading because they
do not fully reveal the importance of corporate
governance to firm performance. In Table 4
we present results with the total index, each
Empirical results sub-index individually, and all sub-indices
included in equations that include all of the
Total sample results control variables. These results indicate that in
The results for the total sample are presented fact all of the governance sub-indices with the
in Tables 3 and 4. In Table 3 Tobin’s q is exception of the Board Composition Sub-
regressed on the total corporate governance Index are statistically significant and posi-
index (CGI) with each of the control variables tively related to performance, even when they
added one at a time. At no time was the CGI are all included in the same equation (the
score found to be statistically significant, at the Shareholding and Compensation Sub-Index is
95 per cent level, although the t-statistic did at statistically significant at 90 per cent levels in
times exceed unity and was at times signifi- that case). Thus, investors are willing to pay a
cant at 90 per cent levels (column 4). Thus we premium for companies that protect share-
find little evidence that corporate governance holder rights, engage in open and full disclo-
affects firm performance, when the former is sure, and have compensation practices that
measured in aggregate terms and there is no align the interests of managers and owners.
consideration of type of ownership. This result Markets do reward some good governance
is consistent with the view that the high level practices.
of governance regulation in developed econo- The same is not true for the Board Compo-
mies, such as Canada, makes the overall level sition Sub-Index. When entered alone, Board
of corporate governance high enough that Composition has a negative sign, but is not
inter-firm differences are not important to statistically significant, and when entered
investors. As will be discussed shortly, this with the other sub-indices the coefficient is
conclusion is not necessarily correct because it negative and statistically significant. Because
does not take into account the various sub- the Board Composition Sub-Index comprises
indices of corporate governance, and it ignores 40 per cent of the total index, this explains
the nature of firm ownership. why the total index is not found to be statisti-
The financial control variables are for the cally significant.
most part statistically significant. Firm size The finding that Board Composition is not
is consistently negatively related to perfor- positively related to performance is not
mance, as is firm leverage; growth and perfor- unusual. Past empirical evidence has gener-
mance are positively related. There is some ally failed to find any significant relationship
evidence that firms in the resource and finan- between board composition and firm perfor-
cial sectors report higher Tobin’s q, other mance and recent surveys of the literature con-
things being equal, but this does not affect the clude that the evidence on this matter is at best
other results. ambiguous (Dalton et al., 1998; Bahjat and
We find very little evidence that ownership Black, 1999, 2001; Hermalin and Weisbach,
type affects performance. With the exception 2003).

© Blackwell Publishing Ltd 2005 Volume 13 Number 6 November 2005


Volume 13

776
Number 6

Table 3: Performance and corporate governance results: total sample, various specifications
November 2005

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)

Total index -0.0031 0.0061 0.0062 0.0065 0.0071 0.0050 0.0049 0.0055 0.0056 0.0059 0.0057 0.0056
(-0.8208) 1.6115 (1.6412) (1.7068) (1.3941) (0.9352) (0.9451) (1.0233) (1.0477) (1.0783) (1.0549) (1.0544)
Size -0.2091 -0.1738 -0.1685 -0.1710 -0.1598 -0.1602 -0.1619 -0.1670 -0.1627 -0.1845 -0.2042
(-6.0124) (-4.6082) (-4.4287) (-4.4534) (-3.7912) (-3.7847) (-3.8006) (-3.8267) (-3.7278) (-3.9282) (-4.2141)
Leverage -0.0358 -0.0369 -0.0370 -0.0383 -0.0407 -0.0404 -0.0389 -0.0406 -0.0252 -0.0399
(-2.9392) (-3.0342) (-3.0296) (-3.0594) (-3.0685) (-3.0541) (-2.9244) (-2.9731) (-1.7512) (-2.5767)
Sales growth 0.0021 0.0021 0.0022 0.0019 0.0019 0.0019 0.0019 0.0022 0.0021
(6.4737) (6.6161) (5.4929) (4.7803) (4.8161) (4.7434) (4.7757) (6.0838) (6.0293)
Variance of -0.0000 -0.0000 -0.0000 -0.0000 -0.0000 -0.0000 -0.0000 -0.0000
ROA (-1.9261) (-1.5142) (-1.4922) (-1.5096) (-1.5135) (-1.5249) (-1.2761) (-1.1516)
Family -0.1157 -0.0242 -0.0493 -0.0442 -0.0396 0.0230 -0.0012
(-0.7597) (-0.1323) (-0.2644) (-0.2363) (-0.2107) (0.1237) (-0.6680)
Widely held 0.1406 0.1060 0.1058 0.1164 0.1419 0.1078
(-0.8545) (0.6157) (0.6130) (0.6638) (0.8225) (0.6218)
Government -0.3384 0.0723 0.0586 -0.1481 -0.1356
(-1.6004) (0.2680) (0.2178) (-0.5013) (-0.4621)
Mixed -0.6183 -0.6020 -0.3698 -0.3857
(-2.0913) (-2.0405) (-1.2056) (-1.2638)
Utility -0.2254 -0.0654 0.0346
(-1.9963) (-0.5870) (0.2857)
Resource 0.4215 0.4730

CORPORATE GOVERNANCE
(2.2569) (2.4852)
Financial 0.4787
(2.7683)
© Blackwell Publishing Ltd 2005

Intercept 1.7518 5.5786 4.8984 4.6797 4.7908 4.7209 4.6412 4.6723 4.7667 4.6693 4.9519 5.3584
(7.1668) (7.8251) (6.2839) (6.0560) (6.0215) (5.9110) (5.8970) (5.8877) (5.8677) (5.7138) (5.8375) (6.0694)
Adjusted R -0.0021 0.1250 0.1316 0.1327 0.1322 0.1307 0.1300 0.1287 0.1270 0.1250 0.1517 0.1608
square

Values in parentheses are t-statistics. Results significant at the 5% level are presented in bold. Dependent variable is Tobin’s q. N = 263. Standard errors are adjusted for
heteroscedasticity.
CORPORATE GOVERNANCE, FAMILY OWNERSHIP AND FIRM VALUE 777

Table 4: Performance and corporate governance results: total sample using the Total Governance Index and
Sub-Indices

Tobin’s q

(1) (2) (3) (4) (5) (6)

Total index 0.0056


(1.0544)
Board composition -0.0119 -0.0260
(-1.4620) (-2.7846)
Compensation 0.0289 0.02384
(2.3793) (1.8188)
Shareholder rights 0.0358 0.0395
(2.7619) (3.1651)
Disclosure 0.0522 0.0770
(2.0691) (2.6322)
Size -0.2042 -0.1797 -0.2231 -0.2094 -0.2169 -0.2692
(-4.2141) (-4.1743) (-4.7802) (-4.7112) (-4.5228) (-5.5920)
Leverage -0.0399 -0.0370 -0.0365 -0.0350 -0.0342 -0.0140
(-2.5767) (-2.4277) (-2.5300) (-2.2618) (-2.1477) (-0.9887)
Sales growth 0.0021 0.0016 0.0019 0.0020 0.0024 0.0018
(6.0293) (4.2398) (4.7012) (6.0432) (6.8696) (4.5380)
Variance of ROA -0.0000 -0.0000 -0.0000 -0.0000 -0.0000 -0.0000
(-1.1516) (-0.4994) (-1.2730) (-0.4535) (-1.5643) (-0.9239)
Family -0.0012 -0.1740 -0.0294 0.0107 0.0120 -0.0105
(-0.6680) (0.9923) (-0.1943) (0.0665) (0.0703) (-0.0584)
Widely held 0.1078 0.1271 0.1024 0.1325 0.1011 0.1310
(0.6218) (0.7293) (0.5851) (0.7627) (0.5881) (0.7608)
Government -0.1356 0.0218 -0.0520 -0.1023 -0.0079 0.3255
(-0.4621) (0.0688) (-0.1932) (-0.3194) (-0.0289) (1.0007)
Mixed -0.3857 -0.3823 -0.4371 -0.4231 -0.5379 -0.8389
(-1.2638) (-1.1984) (-1.4813) (-1.2843) (-1.7758) (-2.6324)
Utility dummy 0.0346 0.0920 0.1050 -0.0184 0.0208 0.0345
(0.2857) (0.8108) (0.8381) (-0.1399) (0.1698) (0.2426)
Resource dummy 0.4730 0.4616 0.4950 0.3886 0.4869 0.3847
(2.4852) (2.3740) (2.6004) (2.0819) (2.5509) (2.0896)
Financial dummy 0.4787 0.4630 0.4772 0.4384 0.4491 0.3448
(2.7683) (2.8259) (2.9423) (2.5022) (2.5660) (2.1852)
Intercept 5.3584 5.5216 5.7362 5.2017 5.6192 6.2379
(6.0694) (6.2725) (6.3337) (6.0143) (6.2307) (6.9766)
Adjusted R square 0.1608 0.1645 0.1696 0.1753 0.1753 0.2211

Values in parentheses are t-statistics. Results significant at the 5% level are presented in bold. Dependent
variable is Tobin’s q. N = 263. Standard errors are adjusted for heteroscedasticity.

Results for ownership categories When the model is estimated for the sub-
sample of family-owned firms (Table 5), it can
Segmenting the sample on the basis of owner- be seen that the total index remains statisti-
ship provides further insight to the negative cally insignificant. Of note, however, is that the
sign on Board Composition. We therefore esti- coefficient on the Board Composition Sub-
mate the model for various sub-samples. Our Index is negative and statistically significant
particular interest is in family-owned firms, when entered alone or with the other sub-
but to provide contrast we also present the indices. For family-owned firms, it is
results for the sample of widely held firms. apparently the case that measures of board

© Blackwell Publishing Ltd 2005 Volume 13 Number 6 November 2005


778 CORPORATE GOVERNANCE

Table 5: Performance and corporate governance results: family firms sample using the Total Governance
Index and Sub-Indices

Tobin’s q

(1) (2) (3) (4) (5) (6)

Total index 0.0052


(0.6948)
Board composition -0.0190 -0.0287
(-2.5030) (-2.9520)
Compensation 0.0371 0.0311
(2.0414) (1.9379)
Shareholder rights 0.0383 0.0402
(2.3354) (2.3864)
Disclosure 0.0500 0.0813
(1.3161) (1.9187)
Size -0.1432 -0.1545 -0.1617 -0.1716 -0.1451 -0.2250
(-1.4999) (-1.6469) (-1.7011) (-1.7482) (-1.5786) (-2.3147)
Leverage -0.0369 -0.0390 -0.0409 -0.0314 -0.0257 -0.0105
(-1.6346) (-1.7394) (-2.1517) (-1.3362) (-1.0052) (-0.4113)
Sales growth -0.0034 -0.0033 -0.0031 -0.0048 -0.0028 -0.0039
(-0.6040) (-0.5784) (-0.5482) (-0.9172) (-0.4817) (-0.8159)
Variance of ROA -0.0000 0.0000 -0.0000 -0.0000 -0.0000 -0.0000
(-1.1599) (0.1888) (-1.8256) (-0.0553) (-1.5684) (-1.0620)
Utility dummy 0.0606 -0.0927 0.1568 0.0640 0.0637 0.1736
(03374) (-0.7896) (0.9524) (0.5227) (0.4025) (0.8740)
Resource dummy 0.0853 0.1220 0.1172 -0.0085 0.0626 -0.0622
(0.3338) (0.4334) (0.4260) (-0.0338) (0.2619) (-0.3118)
Financial dummy 0.0840 0.0611 0.0913 0.0483 0.1068 0.0772
(0.4429) (0.3528) (0.4947) (0.2971) (0.5221) (0.4799)
Intercept 4.1955 5.0828 4.4353 4.4933 4.2206 5.3346
(2.2356) (2.4883) (2.2811) (2.3546) (2.2959) (3.0290)
Adjusted R square 0.1036 0.1416 0.1389 0.1613 0.1367 0.3023

Values in parentheses are t-statistics. Results significant at the 5% level are presented in bold. Dependent
variable is Tobin’s q. N = 84. Standard errors are adjusted for heteroscedasticity.

effectiveness are associated with inferior per- using model 1 in Tables 5 and 6. That is, no
formance. The remaining sub-indices main- statistical difference in the coefficients of the
tain their positive signs, and are for the most two sub-samples is found when the samples
part statistically significant at 90 per cent are compared using a model measuring gov-
levels. A possible exception is the Disclosure ernance by the total governance index. How-
Issues Sub-Index. In contrast, the results for ever, when the sub-indices are used either
the group of widely held firms (Table 6) indi- alone or together, the hypothesis of unequal
cate that Board Composition has no statisti- coefficients is accepted. Thus, the sub-samples
cally significant effect on performance, but like cannot be pooled when the sub-indices are
the family-owned firms, the remaining sub- used. We note as well that the results obtained
indices are typically of positive sign and for the entire sample less the family-owned
statistically significant at 90 per cent levels. firms (not presented) are similar to those
Thus, we conclude that the impact of gover- obtained for the sample of widely held firms.
nance practices on firm performance varies by The major difference between the sample of
ownership category, and also by which gover- family-owned and widely held firms clearly
nance practice is being measured. It is impor- revolves around the effects of Board Compo-
tant to note that Chow tests (Greene, 2003, pp. sition on performance. For family firms, the
130–139) reject the hypothesis of unequal coef- coefficient is negative and statistically signifi-
ficients when the two samples are compared cant. Family firms are apparently penalised for

Volume 13 Number 6 November 2005 © Blackwell Publishing Ltd 2005


CORPORATE GOVERNANCE, FAMILY OWNERSHIP AND FIRM VALUE 779

Table 6: Performance and corporate governance results: widely held sample using the Total Governance
Index and Sub-Indices

Tobin’s q

(1) (2) (3) (4) (5) (6)

Total index 0.0105


(1.1717)
Board composition -0.9757 -0.0264
(-0.6081) (-1.5995)
Compensation 0.0356 0.02493
(2.2027) (1.4026)
Shareholder rights 0.0505 0.0485
(2.2434) (2.3079)
Disclosure 0.0948 0.0998
(1.7295) (1.6814)
Size -0.3001 -0.2482 -0.3183 -0.2882 -0.3179 -0.3632
(-3.8685) (-3.8489) (-4.9816) (-4.5364) (-4.1609) (-5.0163)
Leverage -0.0231 -0.0175 -0.0115 -0.0219 -0.0138 0.0071
(-0.9426) (-0.7131) (-0.4853) (-0.9078) (-0.5377) (0.3129)
Sales growth 0.0024 0.0019 0.0019 0.0021 0.0028 0.0021
(5.8413) (3.9427) (4.7012) (5.1258) (5.7540) (3.3987)
Variance of ROA -0.0000 -0.0000 -0.0000 -0.0000 -0.0000 -0.0000
(-1.7131) (-1.5862) (-2.1289) (-1.0897) (-1.5824) (-1.1687)
Utility dummy 0.1262 0.2733 0.2697 0.06915 0.0597 0.0910
(0.7525) (1.5619) (1.5030) (0.3816) (0.3262) (0.5164)
Resource dummy 0.7127 0.6776 0.7480 0.6110 0.7367 0.6594
(1.9336) (1.7990) (2.0746) (1.7944) (2.0124) (1.8577)
Financial dummy 0.7151 0.6789 0.6790 0.7630 0.5362 0.5057
(2.2757) (2.0617) (2.2500) (2.2694) (1.7315) (1.5600)
Intercept 7.0425 6.9052 6.6145 6.6145 7.4391 7.8912
(5.5573) (5.8022) (5.7186) (5.7186) (5.5347) (6.6645)
Adjusted R square 0.1714 0.1651 0.1862 0.1862 0.1937 0.2177

Values in parentheses are t-statistics. Results significant at the 5% level are presented in bold. Dependent
variable is Tobin’s q. N = 123. Standard errors are adjusted for heteroscedasticity.

having a board that is independent of com- having them, but the marginal penalty applied
pany management. For widely held (and to family firms is lower. Evaluated at the mean
indeed other non-family firms), the relevant value of the Shareholder Rights Sub-Index
coefficient is negative, but not statistically (15.45 for family firms; 17.43 for widely held)
significant. and using the estimated coefficients from
There are other potentially interesting dif- Models 4, the differential impact on Tobin’s q
ferences between family-owned and widely is 0.28 in favour of widely held firms. That is,
held firms that are more difficult to estimate the market places a greater weight on share-
precisely. For example, the estimated coeffi- holder rights at the margin if the firm is widely
cient for the Shareholder Rights term is lower held.
for the sample of family firms. This is interest- Similarly, the coefficients on the Disclosure
ing in that one of the main components of the Issues term in both sub-samples are positive,
shareholder rights index is a question concern- but higher for widely held firms. However, the
ing the existence of non-voting or subordinate coefficients are never statistically significant at
voting shares, which are common in family- 95 per cent levels, making comparison tenu-
owned firms. These results would indicate ous. It is not clear why the coefficient on the
that investors do not like multiple share struc- Disclosure Issues term loses significance when
tures and in general firms are penalised for compared to the full sample.

© Blackwell Publishing Ltd 2005 Volume 13 Number 6 November 2005


780 CORPORATE GOVERNANCE

Discussion and conclusions from the vantage point of stewardship theory,


which sees the role of the board as providing
Our results suggest that corporate governance service and advice rather than monitoring and
does matter in Canada. In general, strong control (Muth and Donaldson, 1998), and
shareholder rights, compensation polices that therefore suggests board structures which rely
align manager and shareholder interests, and on insiders or affiliated outsiders (Sundara-
open and transparent disclosure mechanisms murthy and Lewis, 2003).
that reduce information asymmetry are highly Another explanation for the family firm
valued by investors. However, we find no evi- results is that the measure of board composi-
dence that board composition and indepen- tion and independence employed in this study
dence are valued as governance mechanisms. may not fully reveal the full extent of board
The specific aspects of corporate governance independence. Thus, more refined measures
that are most important to investors can, how- that account for board practices (Dulewicz and
ever, vary depending on firm ownership. Most Herbert, 2004) may be required. Similarly, our
importantly, board independence is negatively assumption that all family firms can be treated
correlated with performance for family firms. in the same way may be incorrect. Family
Ours is not the only study that fails to find firms may well differ along many dimensions
a positive relationship between firm perfor- that impact governance (such as ownership
mance and the ROB governance index. Similar structure, firm culture, managerial experi-
results are reported by Dutta and Jog (2004), ence), and these differences may mean that
using the same governance data. Unlike this governance effects differ across family firms
study, however, they fail to find a positive re- (Corbetta and Salvato, 2004).
lationship between performance and any of In general, our results call into question the
the ROB governance sub-indices. The differ- usefulness of aggregate structural measures
ence in the results may be due to the fact that of corporate governance. As concerns the
Dutta and Jog use somewhat different perfor- weighting scheme developed by the ROB, we
mance measures and control variables. We ex- note that the variables that are most statisti-
pect that these issues will become clarified as cally significant are those whose weights are
research continues using the updated versions lowest in the aggregate index. Since the
of the ROB indices. weighting scheme is essentially arbitrary, it is
It is not unusual to find that board structure possible that a different weighting scheme
is in general unrelated to firm performance, could lead to different results. Clearly there is
as previous surveys have noted, and as a need for financial analysts to examine care-
more recent evidence continues to suggest fully the specific construction of corporate
(Dulewicz and Herbert, 2004; Dutta and Jog, governance measures when trying to draw a
2004; Park and Shin, 2004). However, our find- link with firm performance. Regulators also
ing that board structure is negatively related to need to exercise caution when formulating
the performance of family firms is perhaps policy based on such aggregate indices.
more surprising. This finding supports the Finally, our results must be interpreted in
claim of many family-owned companies that light of country-specific differences in the
a high level of board independence does not governance and ownership environment. The
automatically lead to better performance and importance of governance does appear to
that board independence may not be detri- differ for family-owned firms as compared
mental to minority shareholders. to firms that are widely held. Thus differences
The result that board composition and inde- in ownership structures across countries
pendence is negatively related to firm perfor- may create differences in the governance–
mance may be seen as surprising from the performance relationship. Likewise, differ-
vantage point of agency theory, which focuses ences in the general governance environment
on the monitoring of managers whose inter- (for example, competition in product and
ests are assumed to diverge from those of capital markets, the efficiency of the market
other shareholders. However, the assumptions for corporate control and managerial labour
of agency theory may not fully apply to family markets) may produce different governance–
firms. In family firms, the alignment of performance relationships in different coun-
ownership and control is tighter, thus obviat- tries. For example, as in our study, Alves and
ing the need for outside directors. More Mendes (2004) find that in Portugal there is no
importantly, outside directors with less knowl- relationship between firm performance and
edge of the firm and with less of a financial compliance with overall recommended gover-
stake may in this case lower company effi- nance standards. However, unlike this study,
ciency by distracting managers and by causing they also find that compliance with board
them to focus on short-run goals. In this structure and functioning recommendations
regard, the family firm may be better viewed improves firm performance. These cross-

Volume 13 Number 6 November 2005 © Blackwell Publishing Ltd 2005


CORPORATE GOVERNANCE, FAMILY OWNERSHIP AND FIRM VALUE 781

country differences imply that a global stan- Dalton, D. R., Daily, C. M., Ellstrand, A. E. and
dard for good corporate governance may not Johnson, J. L. (1998) Meta-Analytic Reviews of
be an appropriate pursuit. Board Composition, Leadership Structure, and
Financial Performance, Strategic Management
Journal, 19, 269–290.
Demsetz, H. and Villalonga, B. (2001) Ownership
Acknowledgements Structure and Corporate Performance, Journal of
Corporate Finance, 7, 209–233.
We are indebted to two anonymous referees Denis, D. K. and McConnell, J. J. (2003) Inter-
national Corporate Governance. European Cor-
for constructive comments and suggestions. porate Governance Institute, Finance Working
This research is supported by a grant from the Paper No. 05.
Social Sciences and Humanities Research Doidge, C. (2004) U.S. Cross-Listings and the
Council of Canada. Private Benefits of Control: Evidence from
Dual Class Firms, Journal of Financial Economics,
72, 519–553.
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© Blackwell Publishing Ltd 2005 Volume 13 Number 6 November 2005


782 CORPORATE GOVERNANCE

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Park, Yun W. and Shin, Hyun-Han (2004) Board holds an MA and PhD from Cornell Univer-
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and Collaboration: Paradoxes of Governance, bal asset and wealth management. In addition,
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Appendix
Table A1: Corporate Governance Index (CGI) components

Sub-Index 1: Board composition Criteria: Maximum 40 marks

What percentage of the company’s 8 marks for at least two 66% independent directors
directors is fully independent? 4 marks if more than 50% independent
0 marks if more than 50% related directors
What percentage of the audit 6 marks if the committee is fully independent
committee is fully independent? 2 if there are one or more related directors
0 if a member of management is on the committee
What percentage of the compensation 4 marks if fully independent
committee, the committee that 2 marks if there is one or more related directors who
determines executive pay, is fully are not management
independent? 0 if a member of management is on the committee
What percentage of the nominating 3 marks if fully independent
committee, the committee that 2 marks if there is one or more related directors who
recommends new directors, is fully are not management
independent? 0 if a member of management is on the committee
0 if no nominating committee

Volume 13 Number 6 November 2005 © Blackwell Publishing Ltd 2005


CORPORATE GOVERNANCE, FAMILY OWNERSHIP AND FIRM VALUE 783

Table A1: Continued

Sub-Index 1: Board composition Criteria: Maximum 40 marks

Is the role of chairman and CEO split? 5 marks if jobs are split
If not is there a lead director? 2 marks if the chairman is also a related director
3 marks if the jobs are not split, but there is an
independent lead director
Are there cosy or clubby relationships Start with a maximum of 5 points
among directors?
Are directors stretched too thin? Subtract 3 if CEO or executive chairman of the
company swaps boards with the CEO of another
company
Subtract 2 whenever three or more directors are
together on the board of another public company
Subtract 2 for any director who is on more that 8 other
for-profit corporate boards. (Score can be negative)
Is the company’s CEO busy with 0 points if the CEO sits on four or more other boards
outside commitments? of publicly traded companies; 2 points if three or
fewer
Does the company have a formal 2 points if yes; 0 points if no
system to evaluate the performance
of the board and individual
directors?
Do directors sometimes meet without 2 points if yes; 0 points if no
management present?
How often does the board meet? How 3 points if information disclosed and both the board
often do key committees meet? and audit committee meets at least four times per
year
1 point if they meet less often, or if only partial
information on the number of meetings
0 points if number of director’s meetings not disclosed

Sub-Index 2: Shareholding and Criteria: Maximum 23 points


compensation policy

Are directors required to own stock? 4 points if share ownership is mandatory and equals
(Stock options don’t count) at least three times the annual retainer paid to
directors
2 points if mandatory but ownership requirement is
lower
0 if ownership not mandatory
Do the directors own stock? 4 points maximum
Subtract a point for each director who has less than
1000 shares after sitting on the board for at least a
year. (Score can be negative)
Is the CEO required to own stock? 3 points if it is required, or CEO is majority or
(Stock options don’t count) controlling shareholder
Does the CEO own shares? 3 points if CEO owns more than 50,000 shares after two
years on the job
2 points if more than 20,000 shares
0 if less than 20,000 shares
*if CEO < 2 years on job lower ownership levels qualify
for full marks

© Blackwell Publishing Ltd 2005 Volume 13 Number 6 November 2005


784 CORPORATE GOVERNANCE

Table A1: Continued

Sub-Index 2: Shareholding and Criteria: Maximum 23 points


compensation policy

Are directors in their own separate 3 points if yes or if directors don’t get stock options
option plan?
Does the company give loans to 6 points if there are no loans (or company is a bank
directors or officers? and makes loans with interest payable)
0 points if loans are interest free
Part marks given for loans with interest
Marks decline with size of loan

Sub-Index 3: Shareholder rights policy Criteria: Maximum 22 points

Do all directors stand for re-election 2 points for annual election of all directors
annually? 0 points for staggered boards
Are employee stock options 8 points if dilution is <5% of outstanding shares
excessively dilutive for 6 points if dilution is between 5% and 10%
shareholders? 0 points if more dilutive than 10%
Did the company re-price its options 4 points for no
in 2001 or 2002? (or extend their 0 points for yes
exercise date, or allow them to be
Exchanged for lower-priced
options.)
Are their non-voting or subordinate 8 marks if no
voting shares? 0 marks if voting control is 5 times greater than the
ownership stake. Partial marks were given

Sub-Index 4: Disclosure policy Criteria: Maximum 15 points

Does the company have a full 3 marks if company fully addresses all topics required
statement of corporate governance by the Ontario Securities Commission
practices? 1 mark if company gives partial answers or discusses
only some topics
0 marks if there is no statement of corporate
governance practices
Does the company fully name and 4 points for full disclosure of relationships
explain which of its directors are 2 points if information is missing
“related” and why? 1 point if company lists as “unrelated” someone ROB
considers to be related
Does the company disclose how 4 marks for disclosure (minus 1 if work exceeds the
much it paid its auditor for value of the audit and minus 2 marks if work is more
consulting and other work? than double the value of the audit)
Does the company disclose full 1 point
biographies of its board members?
Does it list other boards its director’s 1 point
sit on?
Does the company disclose 2 points for disclosure but minus 1 for poor attendance
attendance records of its directors at
board and committee meetings?

Volume 13 Number 6 November 2005 © Blackwell Publishing Ltd 2005

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