In a marked turnaround from post-Enron days when strong corporate governance became a key selling point to investors, Standard & Poor’s Governance Services said it would no longer provide public corporate governance scores for U.S. companies, and withdrew its corporate governance score (CGS) on Fannie Mae.
S&P began issuing the scores in 2000, and Fannie Mae became the first U.S. company to reveal its score in 2003. Requested by the companies themselves, the scores reflect what S&P Web site calls an “interactive assessment of a company’s governance structure and practice, conducted with the cooperation of the company.” Companies could either use the reports as a confidential diagnostic tool or publish them.
In explaining its decision, S&P stressed that it has historically factored management and governance issues into its ratings and in March 2004 introduced a risk-based approach to determine cases where added governance reviews might be needed.
It elaborated that governance scores are solicited by companies themselves and are distinct from governance commentary, which it might publish from time to time forms part of S&P’s credit-rating analysis.
Corporate governance scores are also distinct from credit ratings, according the rating company. S&P pointed out that any changes to a company’s CGS wouldn’t necessarily affect a company’s credit rating.
Earlier, S&P lowered Fannie Mae’s score to ‘CGS-6’ from ‘CGS-7’ “to reflect deterioration in the timeliness of disclosure” as the company works to complete its financial restatement. The government-sponsored mortgage enterprise hasn’t reported its financial results in over a year.
S&P’ said it would continue to monitor Fannie Mae’s corporate governance practices as part of its normal credit rating surveillance.