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International Organizations & IFOs

November 15, 2001
Council on Foreign Relations

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[Note: A transcript of this meeting is unavailable. The discussion is summarized below.]

November 15, 2001

Roberto Newell, Speaker

Carolyn Brancato, Speaker

Robert Pozen, Presider

On November 15th, the Corporate Governance RT held a meeting entitled “International Organizations & IFOs,” with Roberto Newell/McKinsey and Carolyn Brancato/The Conference Board. Robert Pozen/Fidelity presided. Discussion at this second session of the RT focused on the governance preferences of institutional investors.

Presentations by the speakers centered on empirical studies they conducted which showed evidence of a preference for good governance practices by institutional investors. Their studies demonstrated that such investors are willing to pay a premium for good governance. These findings held true, particularly for foreign and emerging markets where good governance is the exception rather than the norm. Companies in such markets can, therefore, gain a competitive advantage by adopting these practices.

After the presentations, participants differed over the importance of U.S. regulation in enforcing and promoting standards and questioned whether heavily indexed investors had any influence over the governance practices of companies they invest in. Consensus did emerge when it was suggested that investors are more apt to discount companies with bad governance practices than to pay a premium for companies with good governance. The distinction, though subtle, was considered of major import.

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