Increasingly, shareholders are scrutinizing the corporate governance practices of publicly traded companies. Good corporate governance is reflected in higher valuations‑that is, companies that have high governance ratings are also those that tend to have higher valuations in the marketplace as well as stronger total returns.
Listed REITs are regularly lauded by independent agencies and investment analysts for their strong corporate governance practices. REITs typically receive high marks in important areas such as executive compensation structures, the composition of boards of directors and shareholders’ voting rights.
In its annual governance report for 2010, commercial real estate investment firm Green Street Advisors said REITs held up well when compared with other major industries, noting that the REITs are currently benefiting from being ahead of the curve on important governance issues: “The REIT industry stacks up favorably versus corporate America when it comes to the prevalence of key features like staggered boards. Much of the sector’s relative attractiveness is due to the fact that many companies took steps several years ago to clean up their governance structures.”