Is it all worth it? ... Well, yes

It's not quite life on Mars; but the search for hard evidence that good governance does indeed lead to improved organisation performance and better shareholder returns has been almost as elusive.

Now at last a study of over 600 public companies in Britain, "Governance and Performance in Corporate Britain", conducted by the Association of British Insurers, has come up with some strong indicators:

• Over a five-year period, the shares of companies considered well-governed delivered a return about 4.5% per annum higher than their industry peer group;

• Well-governed companies showed a lower volatility in returns over time;

• Poor governance was associated with 3-5% per annum under-performance and a smaller (but measurable) decline in the market value of assets;

• And the evidence indicated that good governance leads to higher performance, rather than vice versa (and it was a causative relationship, not just a correlation).

The survey also came to the unsurprising conclusion that having more Non-Executive Directors on the Board (NEDs, directors who don't draw a salary for their day-job) led to improved performance. But the key here was balance: having too many NEDs was associated with lower profitability. This suggests that having a mix (the British practice) might be preferable to current New Zealand and Australian - and increasingly American - practice, where most or all the directors are drawn from outside.

So we finally have some evidence to support what many of us have long believed. It may start to counter those popular popular perceptions about boards and those who sit around the table - such as the old question: What's the difference between a director and a supermarket trolley? (Answer: a director may hold more food, but at least the trolley has a mind of its own).

Maybe this survey will be the terrestrial equivalent of finding water and organic chemicals on the Red Planet. I hope it will give directors even more reason to leap out of bed in the morning, looking forward to the Board meeting - and confident, in the words of the late Sir Peter Blake, that we will “make the boat go faster.”