WRDS Overview on Corporate Governance Data Rabih Moussawi
Research Issues in Governance 1. Antitakeover Provisions IRRC Governance Board Analyst Takeover Defenses 2. Board of Directors and Management Board structure, committee composition, etc IRRC Directors, Board Analyst Directorships Executive Compensation, and CEO information Execucomp, Board Analyst CEOs 3. Ownership Information Insider Ownership IRRC Directors, Board Analyst Companies, Execucomp Blockholder Ownership Blockholders Institutional Ownership Thomson s 13f Institutional Holdings 4 Social Ratings 4. Social Ratings KLD Research
1. Antitakeover Provisions IRRC Governance data: 24 individual provisions and 6 state laws + Gompers Ishii and Metrick (2003) index, g-index Data Range: 1990-2004 (biennial or triennial) Data Vintages: 1990, 1993, 1995, 1998, 2000, 2002 and 2004 Primary identifier: 6-digit CUSIP Coverage: 3,463 companies Upcoming: research application on IRRC governance data
IRRC Governance Provisions Category Provision Category Provision Dual Class Delay Protection Voting Dual class common stock Blank Check Classified Board Other Limits it to Call Special Meeting Ati Antigreenmailil Limits for Written Consent Directors Duties Fair Price Compensation Plans Pension Parachutes Contracts Poison Pills Golden Parachutes Silver Parachutes Indemnification Director Liability Severance agreements State Antigreenmail Law Limits to Amend Bylaws Business Combination Law Limits to Amend Charter Cash-out Law Cumulative Voting Directors Duties Law Confidential Voting Fair Price Law Supermajority to approve merger Control Share Acquisition Law Unequal voting
Governance Indexes Gompers Ishii and Metrick (2003): summary measure of level of shareholder rights using 24 governance provisions Single class companies sacrifices precision for simplicity 2 Extreme Portfolios Democracy Portfolio: G-Index <=5 (ex in 1990: IBM, Wal-Mart, Pepsico, HP, TXU) Dictatorship Portfolio: G-Index >=14 (ex in 1990: Time Warner, K-Mart, NCR) Alternative indexes: Cremers and Nair (2005), Bebchuk et Al. (2004)
Example on IRRC Governance Data IRRC Govern nance Company Name Coca-Cola Bottling Co. Consolidated The New Comcast Loews York Times Corporation Corporation Company United Vicor The Washington Parcel Corporation Post Company Service, Inc. Gompers Ishii and Metrick (2003) 7 10 3 8 7 5 6 Governance Index Dual Class 1 1 1 1 1 1 1 Classified Board 0 0 0 0 0 0 0 Poison Pill 0 1 0 0 0 0 0 Anti-Greenmail 0 0 0 0 0 0 0 Fair Price 0 0 0 0 0 0 0 Limits on Shareholders' Ability to Amend Bylaws Limits on Shareholders' Ability to Call for Special Meetings 0 0 0 0 0 0 0 0 1 0 0 1 0 0 Director Indemnification 0 0 0 1 0 0 1 Golden Parachute 0 1 0 0 0 0 0 Cumulative Voting 0 0 0 0 0 0 0 Confidential Voting 0 0 1 0 0 0 0 State of Incorporation DE PA DE NY DE DE DE Business Combination Statute Recapture of Profits Law 1 1 1 1 1 1 1 0 1 0 1 0 0 0
Board Analyst Takeover Defenses Board Analyst (Corporate Library) Takeover Defense Data: 15 individual id provisions i + detailed d information Takeover Defenses as of 2005 2,575 companies with non missing classified board, poison pill, or dual class data More information on dual class structures, poison pills, supermajority requirements. Primary identifier: Company ticker Dual class Classified board Advanced notice Supermajority to amend charter Supermajority to amend bylaws Supermajority to call for special meetings Business combination Supermajority to approve mergers Poison pill Fair price Cumulative voting Restrictions on written consent Board can fill vacancies Directors removal without cause/ for cause only Consider other constituencies
Example on Board Analyst Takeover Defense Data Corporate Library Takeover Defenses Company Name Ticker Dual Class Dual Class Stock Notes Stock Coca-Cola Bottling Co. Common Stock is entitled to 1 vote per share.class B Common COKE Yes Consolidated Stock is entitled to 10 votes per share Comcast Corporation CMCSA Yes Each share of Class A Common stock is entitled to.2082 votes. Each share of Class B Common stock is entitled to 15 votes. Loews Corporation LTR Yes Each share of Common Stock is entitled to one vote.each share of Carolina Group stock is entitled to 1/10 of one vote. The New York Times Company United Parcel Service, Inc. NYT UPS Yes Yes Vicor Corporation VICR Yes Washington Post Company (The) WPO Yes Holders of both Class A and Class B common stocks are entitled to 1 vote per share; holders of Class A stock elect the 5 Class A directors, and holders of Class B stock elect the 9 Class B directors. Holders of class A common stock are entitled to ten votes per share. Holders of class B common stock are entitled to one vote per share. Each share of Common Stock is entitled to one vote.each share of Class B Common Stock is entitled to ten (10) votes. Each share of Class A and Class B Common Stock is entitled to one vote. Holders of Class A stock (of which CEO Donald E. Graham and his family own 100%) elect the 7 Class A directors, and holders of Class B stock, the publicly-traded stock, elect the 3 Class B directors.
2. Board Directors and Management Board Data: IRRC Directors Data: 2900 companies from 1996-2004 director affiliation, committee membership, interlocks, ownership Board size and composition, leadership, committee composition, and beneficial ownership by directors Primary identifier: CUSIP Board Analyst Directorships: 2600 companies from 2001 to 2005 Primary identifier: Company ticker and CIK Executive Data: Execucomp: Compensation (cash, incentive compensation), ownership, and tenure Data Range: 1992-2004 # of companies: 2,600 Primary identifier: CUSIP and GVKEY Board Analyst CEO: 2,200 companies for 2004 and 2005 Primary identifier: Company ticker
Example on IRRC Directors Data DIRTYPE Data IRRC Directors Company Name Coca-Cola The New United Comcast Loews Vicor The Washington Bottling Co. York Times Parcel Corporation Corporation Corporation Post Company Consolidated Company Service, Inc. # of Directors 11 12 11 13 12 7 10 Outside Directors (Independent) 5 0 6 8 6 3 7 Linked Directors (Affiliated) 3 9 0 2 1 1 2 Inside Directors (Employees) 3 3 5 3 5 3 1 Directors on Compensation 4 4 3 5 3 3 3 Committee Outsiders on Compensation 3 0 3 5 3 2 3 Committee Directors on Auditing 4 6 3 4 3 3 4 Committee Directors on Nominating 4 4 3 committee Dirs on Corporate Governance 4 4 3 Committee CEO is Chairman 1 0 0 0 1 1 1
3. Ownership Data Insider ownership: IRRC Directors: Beneficial ownership by Directors Execucomp: Beneficial ownership by Officers Board Analyst: Beneficial ownership by Officers and Directors Thomson s 13f Institutional Ownership: all institutional holdings worth more than $200,000 or 10,000 shares should be reported in 13f filings Thomson s s Insider Filing Data: stock and derivative transactions by insiders officers, directors and 10% blockholders SEC Filings: Forms 3, 4, 5, and 144 Problems with aggregation: Anderson and Lee (1997)
3. Ownership Data Blockholder ownership: shareholders with 5% or more Dlugosz J., R. Fahlenbrach, P. Gompers, and A. Metrick, 2004, Large Blocks of Stocks: Prevalence, Size, and Measurement Company Name MICROSOFT CORP Data Range: 1996-2001 # Companies: 1913 Primary identifier: ticker Example: Microsoft Corp Ticker Name of the blockholder ld as identified d in the proxy statement Date of the annual proxy meeting Number of all blockholders for that firm-year Percentage held by all blockholders for that firm-year Percentage held by the blockholder, corrected for overlapping share holdings The blockholder is an officer of the company The blockholder is a director on the board MSFT GATES; WILLIAM H.; III 7-Nov-01 1 12.3 12.3 1 1
4. Social Rating Data KLD Research Data: Social Ratings: criteria to measure corporate social responsibility Data Range: 2003 # of companies: 655 Corporate policies on Community issues (philanthropy, housing, education, ), Governance (compensation, ownership, tax disputes, ), Diversity, Employee Relations, Environment, Human Rights, Product, other issues (Alcohol, Military, Nuclear Power, and Tobacco) Domini 400 Social Index: Socially screened, y, capitalization weighted index of 400 common stocks
Summary of Governance Datasets at WRDS Topics Dataset Data Range # Source Unique Director Executive Antitakeover Ownership Companie s Key Information Information Provisions IRRC Governance IRRC Directors 1990-2004, biennial 1996-2003, annual 3,463 Articles of incorporation and Prospectus - proxy filings and direct communication with company 2903 2,903 DEF14A - proxy filings 6-digit cusip 8-digit cusip X X( (some) X + g-index Execucomp 1992-2004 2,610 DEF14A - proxy filings cusip & gvkey X + compensation Blockholders 1996-2001 1,913 Thomson Insitutional Ownership Thomson's Insider Filings Board Analyst Data 1980-2004, quarterly Public US Companies DEF14A - proxy filings (similar to 13D and 13G filings) 13f filings 8-digit Public US 1986-2004 Forms 3, 4, 5, and 144 Companies ticker cusip 8-digit cusip all >5% shareholders institutional change in insider ownership Corporate Library Data 2001-2005, annual 2,600 DEF14A - proxy filings ticker and CIK X X (2200 comp. for 2004-2005) X Corporate Library - Takeover Defenses 2005, latest 2,575 Articles of incorporation, Prospectus, and proxy filings ticker X
The Future of Governance Data: Suggestions? Comprehensive governance data Detailed provision features charter vs. bylaw classified board Number and types of classes in classified board Adoption/repeal dates Mutual Fund Board Data Voting Data Board elections and proxy fights Shareholder h and management proposals, vote outcome, and managerial reaction International Governance Provisions