Stock Exchange Indices Commit to Corporate Governance

rightsizing your erm governance framework
January 23, 2014

The importance of corporate social responsibility (CSR) reporting has evolved from a non-mandated realm to increasingly regulated as motives for reforms and improvements are made worldwide. Countries are beginning to recognize that higher commitments to corporate governance will lead to increased transparency in non-financial areas.

Although each country may have different underlying motives, it is evident that corporate governance can help address legal and regulatory gaps in corporate behavior and increase foreign and domestic investments for these companies. As a result, eight stock exchanges have launched Corporate Governance Indices (CGI) since 2001.

In July 2013, the New York Stock Exchange (NYSE) also joined the United Nations Sustainable Stock Exchanges (SSE) Initiative designed to promote corporate transparency as well as increased collaboration between companies and their stakeholders on environmental, social, and governance issues. NYSE joins NASDAQ OMX, BSE Ltd., BM&FBOVESPA, the Johannesburg Stock Exchange (JSE), The Egyptian Exchange (EGX), and MCX Stock Exchange Ltd. (MCX-SX) in the SSE.

According to the International Finance Corporation (IFC) study Raising the Bar on Corporate Governance: A Study of Eight Stock Exchange Indices, the number of companies listed on the indices has substantially increased over a short period of time. The reason for this increase could be due to the fact that CGIs offer these companies incentives, such as opportunities to differentiate themselves in the market.

Additionally, the exchanges have been following the "comply or explain" philosophy to handle enforcement of the local CSR reporting. Following the CGIs is not necessarily mandated yet, but it provides a reference point for companies to start reporting and to prepare for the time when reporting is compulsory, as well as "points a finger" at those who chose not to report, obliging them to explain the reasons for not doing so. These differentiating factors allow companies to become more attractive to investors, resulting in an adoption of improved governance practices.

Furthermore, their reports contribute to creating measurable governance benchmarks that will lead to increased comparability. These local and global initiatives display a commitment to corporate governance.

However, they still face ongoing challenges and have room for improvement.

Firstly, there seems to be a lack of consistency in reporting across these countries, which can be attributed to different underlying reasons for implementing the CGIs.

Additionally, standards to monitor, evaluate, measure, and rate reports are not streamlined and consume time and resources. In some cases, the criteria itself is not always measurable either. In the long term, the CGIs will encourage countries to improve their overall corporate governance environment.

Hopefully, this will lead to the present shortcomings in corporate governance to be addressed worldwide and will also motivate other indices to implement CGIs. The eight countries that have implemented CGIs are already experiencing significant growth and have set an example for others to follow.


    Di Benedetta, P. and Grimminger, A. (2013). "How Stock Exchange Indices Can Advance Good Corporate Governance Practices." The Harvard Law School Forum on Corporate Governance and Financial Regulation. Retrieved from

    "GRI stakeholder, NYSE Euronext, strengthens its commitment to corporate transparency." (2013). Global Reporting Initiative. Retrieved from

    Grimminger, A. and Di Benedetta, P. "Raising the Bar on Corporate Governance: A Study of Eight Stock Exchange Indices." (2013). The World Bank International Finance Corporation. Retrieved from

    Francis Quinn

    About the author

    Francis Quinn is the Director of Corporate Sustainability Technologies for Workiva. Before joining Workiva, he directed sustainable development for L’Oréal in Paris.