Merck ranked among top boards in US study

THE BOARDS of BlackRock, Merck Co and Caterpillar topped a ranking of the most capable boards of directors in corporate America, while a publicly traded affiliate of activist investor Carl Icahn came in last.

Companies rated as the least capable boards included several traditionally family- or founder-controlled companies, including Tyson Foods, Dole Food Co and DR Horton.

A study by James Drury Partners, which conducts director searches, ranked boards of the 500 largest US firms by revenue, based on the number and experience of their directors. It gave most weighting to outside directors who are chief executives at other firms, arguing they were most likely to have the experience and independence to challenge management, and less likely to be cowed by a fellow chief executive.

The report found the shares of better-governed companies, as measured by the number and experience of the directors on their boards, outperformed the stocks of their less capable peers.

In a group of 25 firms whose boards were stronger than the consultancy expected given the company’s size – including MasterCard and Rockwell Automation – their shares rose 29 per cent over the past five years.

That outpaced the 16 per cent rise in a group of 25 firms whose boards were weaker than the consultancy expected given their size, including Wal-Mart Stores and Microsoft.

Microsoft, which in the past six months has added the current chief executive of Seagate Technology and the former chief of Symantec to its board, declined to comment. Wal-Mart did not respond to a request for comment.

Mr Icahn, known for challenging managements and shaking up boards of underperforming companies, said the survey was flawed in including Icahn Enterprises – where he serves as chairman and owns the vast majority of shares.

“We’re a general partnership. A GP structure is vastly different from a corporation because you don’t even have votes. Even if that wasn’t the case, I own 96 per cent of the company,” he said. The billionaire investor said he agreed that many corporate boards fail to police management or represent shareholders. – (Reuters)