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CGQ Methodology
Corporate Governance Quotient
Corporate governance ratings to evaluate risk
RiskMetrics Group employs a “bottoms up” approach to collect and analyze the data used to determine a CGQ® score. Data is derived from public disclosure documents, press releases and corporate websites and goes through a rigorous verification process by our senior corporate governance analysts. In addition, corporate issuers may review and verify the information we have collected on them through a free Data Verification tool.
Once the data are collected, specific rating factors are applied resulting in a raw score. This raw score is then used to determine a company’s relative score with respect to index and industry group, as well as sub-scores in four key areas: Board Structure, Anti-Takeover Defenses, Audit and Compensation/Ownership.
The CGQ database provides corporate governance data on nearly 7400 companies worldwide, with underlying data points for up to 65 individual corporate governance variables in eight areas of focus. These variables are weighted in the scoring methodology based on their statistical correlation to a range of risk and performance metrics. In some cases, variables are reviewed together based on the premise that corporate governance is enhanced when specific combinations of these factors are adopted.
Since the data is reviewed and updated regularly, both by our analysts and by corporate issuers through the Data Verification tool, CGQ ratings are dynamic. Changes to one company’s rating will impact others in its index or industry group, as individual company scores are determined relative to others in that group.
