The Street blinked.

• Author: Kristie, James
• Position: Wall Street investors will pay more for securities of those firms that are well governed. - Column

Wall Street believes in good governance ... in fact, will pay up for the stock of companies that are perceived as being well-governed -- or so we are being told. McKinsey & Co.'s study of investors and just how much of a governance "premium" they would be willing to pay is being frequently cited as a key piece of evidence. (Highlights of the study were published in the Spring 1997 issue of Directors & Boards.) Other surveys and anecdotal soundings are making similar claims for The Street's getting religion on governance.

Pardon my skepticism. Let's go to the tape. On November 12, the news went over the wire that the board of Compaq Computer Corp. was named "Board of the Year." This annual award is presented by the Wharton School of the University of Pennsylvania and Spencer Stuart under the auspices of their Wharton/Spencer Stuart Directors' Institute, an executive education program for board members. This is as singular a recognition as exists today of a corporation's having a model board and governance practices. If an Oscar for Best Picture translates into millions of additional revenue, the Board of the Year citation, presuming Wall Street is tuned in and turned on, should be worth more than a couple upticks. At the end of the trading day on November 12, Compaq dosed off almost 3 and % points.

Some caveats (there are always caveats when it comes to analyzing stock trading patterns). That happened to be a big down day for the market. It was also one of those days when The Street was blowing cold on the technology sector. Recognizing that one has to be careful in...