Boardroom Alpha’s Performance ESG Ratings continue to demonstrate that better teams outperform and bad teams underperform.
In an analysis of the highest and lowest Boardroom Alpha Rated boards of directors (for large-cap US corporates) companies with the highest average board ratings beat the market, while companies with the lowest average board ratings significantly underperform the market.
Boardroom Alpha’s ratings are derived by using a bottoms-up approach – we assess each director based on their full track record and aggregate the individual ratings to arrive at a company-level board rating.
Investment managers should be keenly aware of the track record of the management teams that they are investing in, Boardroom alpha provides the necessary quantitative assessment of the people who are in charge.
Highlights from the Bottom
The State Street board looks in need of a material refresh with a current average Director Rating of C- and directors that skew older, including no director under the age of 55.
Textron, also with an average director rating of C-, added A+ rated Director Lionel L Nowell III this year to help out their average, yet 5 directors still have tenures > 10 years, including 73-year old Lead Director Paul E Gagne (D) who has served for over 25 years.
Molson Coors, despite a decent Q3, still sports a board rating of a D with little gender diversity. Just two of fourteen (~14%) directors are women and the second, Nessa O’Sullivan, was only recently added to the board at this year’s annual meeting in May 2020. Four members of the Molson and Coors families, respectively, also serve on the board.
Highlights from the Top
CoStar Group, one of the big winners of the year, sports an average director rating of B+. The board has industry heavy hitters such as Hilton CEO Christopher Nassetta (A-), in addition they have added an additional female this year in Louise Sams (B+), to improve their gender diversity to 25%.
Arthur J. Gallagher & Co., the insurance broker, has vastly outperformed the broader Insurance sector this year, and has a board with an average director rating of A-. Yet, ESG investors take note as just one of the board’s ten members is female. The board does sport a nice mixture of fresh faces and company veterans with solid tenure diversity.
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