Artistic "Science"

“Since the Enron scandal, a coterie of corporate-governance firms has emerged as standard-bearers for shareholder rights... The firms -- which include the Corporate Library and RiskMetrics Group's ISS Governance Services … sell, among other things, ratings that say whether a company is well governed or not.

“But a new study from Stanford University's law and business schools gives mostly dismal grades to four of the biggest rating services...

“Statistical tests run by the Stanford academics found little or no correlation between the different services' ratings. Pfizer, for instance, earned a perfect ‘100’ from ISS in 2005, but a ‘D’ from the Corporate Library. Lockheed Martin scored a 9.5 out of ten from GMI, but Corporate Library gave it its worst possible grade, an ‘F’ …

“Companies, fearing the scrutiny of shareholder activists or the wrath of the raters, sometimes do pirouettes to improve scores…

“The Stanford team found very little or no statistical evidence of links between the ratings and company performance, undermining the firms' very reason for being… On average, [ISS’s] top-ranked companies were more likely to have class-action lawsuits than its lowest-rated companies.

“‘The fact that our primary customers are investment managers suggests they are finding value in what we deliver,’ said Howard Sherman, CEO of GMI…

“The Stanford findings reinforce a growing sentiment that governance ratings are an art, not a science. ‘It points out that there's no grand unified theory of corporate governance,’ says Cary Klafter, vice president of legal and corporate affairs at Intel.”

(“Who's Watching the Watchdogs?” James Bandler, Doris Burke. Fortune: July 7, 2008. Vol. 158, Iss. 1; pg. 18)

THE DANCE IS A FRENZY, and the music is manufactured. Hey, if customers like it, then why not... ?

We look for what we want to discover. We see what we want to appear.

"Torture the data until they confess!"