FTSE International has teamed up with the Institute of Shareholder Services to create ratings standards for corporate governance, which it says could be used as the basis for structured products.
“You will be able to create a product based on the best-governed companies by country, sector or theme,” said SRI consultant Will Oulton, who spoke on behalf of FTSE at Structured Retail Products.com’s annual conference yesterday. “They will capture the best-governed companies in the world,” he said. “Investors will be interested in removing the governance risk without sacrificing performance.”
FTSE will publish the ratings from April. The index provider has drawn on OECD governance principles to establish the ratings, which will be assigned to all companies in the FTSE indices. Ratings will range between five (best) and one (poor).
Oulton said it is possible that a company that appears in the socially responsible (SRI) FTSE4Good index would not have a high corporate governance score. Enron would have been one such example, he said.
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