THE powerful arbiters of best boardroom practice have come under fire for a string of alleged errors in their assessment of a British listed company.

Institutional Shareholder Services (ISS), which names companies with corporate governance shortcomings for the National Association of Pension Funds, was accused of “wildly inaccurate results” by Benfield, the insurance broker, yesterday.

Other UK companies are understood to have complained to ISS about its methodology in an ambitious new project with the FTSE Group, the independent company that reviews firms on the stock market. Their Corporate Governance Index series, launched this month, scores every British listed company on more than 50 measures of good governance — from boardroom attendance levels to directors’ pay and the integrity of the audit process.

Benfield was identified by ISS as one of the worst three listed companies for corporate governance in Britain.

John Coldman, the chairman of Benfield, complained of five “fundamental errors” in information held by ISS and used in its assessment. ISS said that Benfield did not have established audit, remuneration and nomination committees, which was “plainly untrue”, he said.

ISS said that Benfield had failed to disclose the size of its board, when the numbers were recorded in the 2003 and 2004 annual reports, Mr Coldman said. The group also got its facts wrong on board attendance and on the ratification of auditors, as well as failing to take account of published information on the directors’ option scheme, he said.

ISS appeared to have based its research on information collated in early 2003, he said. “We remain concerned that the information collected by ISS, which has then been used to develop an index for the investor community, has apparently paid little regard to public disclosure made by Benfield over the past two years,” Mr Coldman said.

He was also concerned that ISS had apparently put the onus on companies to update it about changes. Neither ISS nor FTSE were “a regulatory or other body which might impose such obligations on listed companies”, he said.

A source close to British Land, which was ranked equal-last among FTSE 100 companies, had questioned ISS’s methodology, describing its conclusions as “unfathomable”.

Stanley Dubiel, the managing director of international research at ISS, conceded that its information was largely based on an annual snapshot of each company taken at about the time of its annual meeting. Companies were given access to the ISS website to register changes, he said. Benfield accessed the site last October and had not made any previous complaints, he said.

IS YOU ISS, OR IS YOU AIN’T?

• US-based ISS is one of the most influential bodies on corporate governance, advising more than 1,000 institutional investors
• Chaired by governance guru Bob Monks; Hermes is a significant shareholder
• In the UK, in a joint venture with the NAPF, ISS advises funds on how to vote at annual meetings
• It has urged shareholders to vote against resolutions at the annual meetings of Royal Bank of Scotland, French Connection, Shore Capital and Travis Perkins

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