Yannick Ouaknine is a senior analyst with the Socially Responsible Investing group at Société Générale S.A. The following post is based on an SG publication by Mr. Ouaknine, Daniel Fermon, Nimit Agarwal, Carole Crozat, and Niamh Whooley. This post relates to an SG publication titled “CEO Value,” issued June 6, 2016, available here.
Our CEO Value stock selection process makes a simple assumption: a company that has relatively sound corporate governance principles but that has underperformed peers over four years should see a turnaround in its share performance. Sound corporate governance principles should enable a company to fix weakness or at least prevent deterioration either by changing its strategy or management—or both.
We look for stocks that have the following characteristics: 1) underperformed peers by at least 15% over the past four years; 2) not changed CEO for the last three years—the time needed to implement a strategy and reap the rewards; 3) a ‘solid’ financial structure; and decisively, 4) ‘sound’ corporate governance standards.