Lord Abbett believes that companies with strong corporate governance practices are better positioned for long-term success. Our fundamental research process includes a thorough review of companies’ corporate governance profiles, with a particular focus on the following key factors:
- Board of Directors – An independent and effective board is critical to the long-term success of a company. Particular attention is paid to board composition, including:
– Director Independence
– Diversity (background, gender, race, etc.)
– Board Committees and Leadership
- Auditors – Independent auditors are necessary to ensure the accuracy and legitimacy of company finances and disclosures.
- Capital Structure – Companies should make capital structure and allocation decisions with the goal of maximizing long-term shareholder value.
- Compensation – Executive compensation, including equity based incentive plans, should be aligned with long-term shareholder objectives.
- Shareholder Rights – Shareholders should be afforded certain rights, including the right to vote, to ensure accountability of the board to the company’s shareholders.
- Disclosure – Companies should provide robust public disclosure of relevant information to allow for a full and accurate assessment of a security by investors.
As an active manager, we incorporate each of these corporate governance factors into our fundamental analysis and decision making process.
