Three research firms – the Corporate Library, Institutional Shareholder Services (ISS), and Governance Metrics International – rate companies for their quality of governance (Fortune, Nov.14, 2005 at 46). Each rating firm uses its own methodology and data sets to grade companies on the important set of activities loosely termed “governance.” People pay for these ratings and insights because the risks from poor governance affect insurers, investors, regulators, lenders and others.
The risks from poor legal advice also loom for companies, and also affect the same constituents, yet to my knowledge no third party assesses companies comparatively on the quality of their legal staff, the adequacy of their in-house legal resources, the legal surefootedness of their outside counsel, the protections provided their intellectual property, the liabilities faced by them through regulatory and judicial proceedings, and the adroitness of management practices. (See my post of Sept. 10, 2005 on Chief Governance Officers and law departments and my meta-post on risk management of Nov. 15, 2005.)
If analysts can make money comparing something as amorphous as governance, why don’t they evaluate legal preparedness?