PotashCorp takes a share of third spot in the latest annual ranking of Canadian corporate governance by Canadian Business magazine.
PotashCorp received 95 out of a possible 100 points. Only SNC-Lavalin Group Inc. and Nexen Inc., each with 97 points, registered higher scores in the seventh annual ranking by the magazine. Telus Corp., Gilden Activewear Inc. and Agrium Inc. also received scores of 95. Last year, PotashCorp placed 11th.
PotashCorp received the highest possible scores in three of four categories: total shareholder return, independence and accountability. The corporation scored 15 out of a possible 20 points in the disclosure section of the survey.
Canadian Business does not provide a breakdown of where the 275 companies studied gained or lost points. But the magazine's website sets out the methodology used to assess corporate performance.
The total shareholder return category compares the corporation's three-year performance on the Toronto Stock Exchange to that of its peers. Criteria used to judge board independence include: reviewing whether board and committee members have any business, personal or family connections to the corporation and its senior management; the democratic nature of the company's share structure; and whether CEO compensation reflects performance.
In rating board accountability, survey administrators considered criteria such as: director and CEO share ownership, which is "the best way to align the interests of directors and managers with regular investors", according to the magazine; whether directors are paid in stock options; and how boards evaluate their own performance. The disclosure category included a review of: how far a company goes beyond the basic requirements of reporting; and the clarity of published materials, including the total value of executive pay packages.
In an article accompanying the results, which ran in the magazine's Aug. 13-17, 2007 issue, Canadian Business quotes DeGroote School of Business Professor Chris Bart, who says most shareholders aren't interested in governance as an abstract theory. The Hamilton, ON professor of strategic market leadership says that what shareholders care about is how companies use governance to create superior financial performance.
"They just want a board that does its job," Bart tells the magazine.
