GMI Risk List Highlights Companies with Governance Issues

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GMI identifies 10 companies with serious environmental, social and corporate governance concerns

NEW YORK--(BUSINESS WIRE)-- The GMI Risk List, issued today from GMI, the leading corporate governance research firm, identifies 10 individual companies with specific patterns of risk that GMI believes are critical for investors and other corporate stakeholders to monitor and address.

The new report identifies ten of GMI’s most poorly rated firms in North America, representing an array of environmental, social and governance (ESG) and accounting transparency issues (which GMI calls ESG+) identified through comprehensive GMI research.

The GMI Risk List highlights the following 10 companies:

Company

Exchange

Ticker

Industry

Apollo Group, Inc.

NASD

APOL

Personal Services

Comstock Resources, Inc.

NYSE

CRK

Oil / Gas Exploration / Production

Comtech Telecomm. Corp.

NASD

CMTL

Communications Equipment

Discovery Communications

NASD

DISCA

Broadcasting

EZCORP, Inc.

NASD

EZPW

Consumer Financial Services

K-Swiss Inc.

NASD

KSWS

Footwear

M.D.C. Holdings

NYSE

MDC

Homebuilding

News Corp

NASD

NWSA

Media Diversified

SandRidge Energy Inc.

NYSE

Oil / Gas Exploration / Production

Scientific Games Corp.

NASD

SGMS

Casinos / Gaming

“As we have seen from several recent notable scandals and blowups, corporate failures are often driven by non-financial issues, in areas where management is not sufficiently addressing risks or has interests that are not aligned with long term performance and sustainability,” said Jack Zwingli, CEO of GMI. “ESG risk factors impact long term company valuations and the cost of capital, and are being used by investors and others – including corporations – to complement traditional valuation models and company disclosures.”

Brief descriptions of the key concerns identified at each of these firms are given in the report, but include:

Board independence issues, including long-tenured directors, insiders and other non-independent directors;
Executive remuneration problems including pay-performance disconnects, weak performance targets, and overly discretionary policies;
Ownership structures that disadvantage most public shareholders such as multiple share classes with disparate voting rights, or controlling shareholders;
Poor disclosure of environmental and health and safety risks and policies;
Accounting transparency issues involving revenue and expense recognition and other forensic accounting measures.

Greater detail about each company’s ESG weaknesses are available via GMI’s ESG+ research platform, GMI Analyst, including a list of the red flags assigned to each company, and an extensive array of supporting information and analysis.

“Fiduciaries increasingly consider an evaluation of ESG issues a core part of their investment due diligence. Our Risk List research is intended to assist investors in identifying particular ESG factors that may correlate with negative events,” said Kimberly Gladman, GMI’s Director of Research and Risk Analytics.

GMI assigns ESG Ratings to approximately 4,200 of the world’s most actively traded companies. They are summarized through GMI’s research platform, where red flags highlight at a glance some of the highest-profile concerns for the investors and fiduciaries. After analytical review, not more than 5% of these companies receive the lowest rating of “F”. The process to identify the F-rated companies included analysis to identify accounting items associated with fraudulent financial statements, as well as those corporate governance factors most indicative of a disconnect between management and investor interests. This approach provides an especially powerful means for identifying and managing ESG+ risks: comprehensive review of corporate governance and other sustainable investment concerns plus an equally effective assessment of accounting aggressiveness and transparency risks.

GMI was formed in December 2010 after the merger of The Corporate Library, renowned for its deep, proprietary research on critical governance issues; GovernanceMetrics International, noted for its global coverage along with a comprehensive set of ESG metrics and analysis; and Audit Integrity, with expertise in providing forensic accounting analysis and risk models.

The GMI Risk List is available for download here.

About GMI

GMI is the leading independent provider of global corporate governance and ESG ratings and research. GMI ESG ratings, covering more than 4,200 companies worldwide, are built on extensive research and modeling that incorporate a broad spectrum of Environmental, Social and Governance (ESG) metrics. GMI ratings also encompass accounting transparency issues, to support the goal of identifying companies at risk. GMI ratings are widely used by leading institutional investors, banks, insurers, auditors, regulators and corporations seeking to incorporate corporate governance and ESG factors into risk assessment and decision-making. GMI’s clients have found a valuable link between GMI ratings and major negative events, such as regulatory actions, shareholder litigation, material financial restatements and financial distress – all of which impact investment returns and company performance. GMI is a signatory to the United Nations-backed Principles for Responsible Investment Initiative (PRI), a network committed to incorporating ESG research into the investment process. GMI is the combined entity of GovernanceMetrics International, The Corporate Library and Audit Integrity, which all merged in December 2010. For more information please visit www.gmiratings.com.