MOUNTAIN VIEW, CA: An Institutional Shareholder Services (ISS) survey of the corporate governance practices of companies in the S&P 500 stock index got attention for the one company not even in the index.
ISS included Google in the survey because of its market cap, but the search engine company, which went public August 19, ranked nearly last in the survey.
Proxy firm ISS argued that Google's governance structure puts outside investors at a disadvantage to inside investors, according to CNET.
Google declined to comment for this story.
Google was criticized by ISS for leaving shareholders to place their trust "in an unproven senior management team and a board dominated by early-stage financial backers, who may have short-term interests that don't match those of other shareholders," according to CNET's story.
The story also noted other criticisms, including Google's two classes of stock and voting rights, which give some investors 10 times as many votes per share than others, something that drew criticism in the weeks before the IPO.
ISS also criticized the board of directors, of which less than two-thirds are independent outsiders.
Media interest in the ISS survey focused heavily on Google. BusinessWeek management editor Louis Lavelle blasted Google's corporate governance in an article on the magazine's website, and used the ISS study to back up his arguments.
"The head Googlers have seen to it that the company obtains all benefits of public ownership - with hardly any of the responsibility," wrote Lavelle.
Not all of ISS' comments were negative. A Dow Jones story points out that ISS praised Google for its separation of CEO and chairman, its compensation committee being composed of independent outside directors, and its plan to hold annual board elections.
But the media interest in ISS' comments on Google demonstrates the importance of corporate governance, said Susan Michels, a VP with the Financial Relations Board. "ISS has really set the bar for corporate governance issues."
In the current economic landscape, post-Enron and post-tech bubble, companies are much more aware of the importance of corporate governance, and are dedicating more resources to it, Michels added. The key thing for companies to focus on is independence, particularly for their boards of directors and all related committees.
Bob Ferris, executive MD of RF/Binder Partners, stressed that the point of Sarbanes-Oxley and other corporate governance rules is transparency and independence.
But a deluge of such rules has paralyzed many companies, which are too dependent on legal interpretations of such rules, he added.