ISS, which provides proxy voting and corporate governance advice to institutional investors, said in a press release that it began the rating system Tuesday, according to a Dow Jones news report.
The ratings are scored from 1 to 100, with 100 being a perfect score, and are based on seven aspects of corporate governance, from executive and director compensation to board structure and composition.
Each company will receive two scores: One that rates the company, and one that rates it compared to its peers.
Examples of practices that will lead to higher scores include having a majority of independent directors on a board, having significant director and officer stock ownership, and providing director education at an accredited institution.
ISS said it will initially rate all companies in the Russell 3000 Index and will eventually extend coverage to global companies.
The ratings will be available on the front page of each ISS proxy analysis, and the firm’s database of scores will be searchable by institutional clients, said a spokeswoman.