Some Corporate Governance Improvements by North American Firms – Report

A review by Moody’s Investors Service of more than 160 of the largest US and Canadian corporations reveals significant strides in increasing the expertise, independence, and diversity of their boards of directors. In particular, improvements were reported in their audit committees, and in implementing more bondholder-friendly compensation schemes. These improvements notwithstanding, the study finds that one out of four companies reviewed still offer executive compensation that is based on formulae that promote a short-term focus or an unhealthy appetite for risk from a creditor perspective. Primary areas of credit concern raised by the Moody’s review include weaknesses in the oversight or execution of audit controls, risk management, and compliance, and in succession planning. Although controls and compliance are areas in which substantial improvement has been made over the past few years, Moody’s has cited oversight challenges, ranging from the independence and effectiveness of the internal audit function, to the lack of an enterprise risk-management systems, at approximately one out of three companies it has reviewed. Moody’s likewise raised concerns related to succession planning for about one out of three companies.


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