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Funds Create Financial Incentive For Analysts To Screen For Governance

Quinn Lawrence Richter | December 14, 2004

Frustrated with sell-side analysts’ failure to screen companies for governance risks, a consortium of European funds with over $460 billion in assets recently announced a plan to steer 5 percent of commissions to brokers who includes such analysis of intangibles into their research.

The program, officially dubbed the “Enhanced Analytic Initiative,” is considered an industry first, and experts say the move could significantly impact public companies by elevating the profile of “soft” metrics—like governance ratings and corporate social responsibility profiles. And the funds behind the EAI expect that the move will not only be adopted by other asset managers, but that it will increase both the quality and transparency of research.

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