Corporate Governance Ratings : One Score, Two Scores, or More?

Considerable attention has been focused on corporate governance ratings. These ratings have become even more important as a number of recent studies have found positive associations between better corporate governance and firm market value, firm performance, and other indicia of interest. However, devising governance standards that apply to all firms is difficult as there are important differences among firms (and countries) that tend to undermine efforts to come up with a uniform measure or ratings system for corporate governance. In The Elusive Quest for Global Governance Standards, 157 U. PA. L. REV. 1263 (2009), Professors Bebchuk and Hamdani address this issue and provide an analytical framework that leads to the development of two standards for assessing good corporate governance that have applicability across many firms and countries.In this response, I examine Bebchuk and Hamdani's analysis and explore how one might implement parts of it. In the process, I rely on some of the experiences of other countries - especially emerging markets such as India, Korea, Russia and Brazil - to enrich the discussion and aid our understanding. Part I briefly summarizes Bebchuk and Hamdani's analysis. Part II discusses their analysis and examines potential critiques. It concludes that these critiques do not weaken Bebchuk and Hamdani's recommendations and discusses why their recommendations are both valuable and well-balanced. Finally, Part III concludes with some thoughts on how to begin to implement Bebchuk and Hamdani's recommendations