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Mid Cap’s governance rated as Mediocre

A new survey on mid caps shows a poor report card on corporate governance for mid sized listed companies in recent research conducted by the University of Newcastle for WHK Horwath.


The 2008 WHK Horwath Mid-Cap Corporate Governance Report, conducted by the University of Newcastle, is an extension of the recently released 2008 WHK Horwath Large-Cap Corporate Governance Report This report provides an objective and independent assessment of the corporate governance structures of companies listed from 251 to 400 on the ASX – the so called “mid sized” companies with an average capitalised value of $243 million.

The report rates the corporate governance of mid-cap companies as ‘mediocre’ and well below that of large cap companies.

Corporate governance is important for all sized companies

You might presume that corporate governance has greater relevance to larger companies than smaller companies, however such a presumption is not valid. The report’s co-author, Associate Professor Jim Psaros from the University of Newcastle, clearly notes “The core principles of corporate governance; monitoring and assessing risk; optimising performance; creating value; and providing accountability are equally relevant for all listed companies”.

Whilst selected companies can be commended on their strong corporate governance, the overall results are disappointing. Over one third (34%) of mid-caps failed to achieve better than a two-star ranking suggesting their governance is at best, lacking in some key areas (two-star) or, at worst, lacking in most key areas (one-star).

On a more positive note, 52% of companies achieved between three and four stars suggesting that many Mid-Cap companies are paying more than “lip service” to the need for adequate corporate governance. With not a lot of additional work these companies could achieve a substantially higher ranking (and by inference more robust corporate governance) by appointing an additional independent director to the board, establishing a functioning nomination committee and giving more rigor to their share trading policies and risk management systems.

To download the full report valued at $499 free of charge for the next 60 days, simply email edwina.oostergetel@whkhorwath.com.au with your complete details.

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