Momentum is also global. In almost every market studied, a majority of investors say that corporate governance is more important today than it was three years ago and will become even more important in the next three years. Again, Chinese investors lead the responses, with 93 percent anticipating that corporate governance will become significantly or somewhat more important over the next three years, followed by investors in Continental Europe. "There is momentum," observed a study participant from a Dutch investment management firm. "Things are going fast."

Investor perceptions of the value of corporate governance are also consistent across the world. A majority of investors in all markets studied say that corporate governance in their institutional investing "offers value but is hard to quantify," ranging from a high of 84 percent in Canada to a low of 52 percent in Japan. In addition, a range of 18 percent to 38 percent of investors believe that focusing on corporate governance offers competitive advantage in their equity investments. In addition, a majority of investors in every market studied believe that their relationships with portfolio companies have become more constructive, ranging from 61 percent in the U.S. to a high of 92 percent among Chinese investors.

Global Forces Shaping Governance Practices
Globalizing forces exert a pull that shapes and accelerates the development of corporate governance in markets throughout the world. The introduction of corporate governance regulations and best practices in one country or region (such as the European Union) increasingly affects practices in markets far beyond those borders.

"You haven't discussed the speed of globalization of corporate governance," a British investment manager remarked when prompted for thoughts on issues we hadn't already covered. "There's a lot of 'copy-cat' tactics," he continued, referring to the spread of best practices from one market to another.

For example, in 2002 the U.K. became the first country to require companies to submit remuneration reports to a shareholder vote. Though non-binding, the votes enable shareholders to voice their concerns on corporate compensation packages. A year later, the Netherlands took the same practice one step further by requiring companies to submit remuneration reports to a binding vote by shareholders. In 2005, Sweden and Australia both adopted requirements for non-binding shareholder votes on remuneration reports.

This year, remuneration reports have become a topic of debate in the U.S. The American Federation of State, County, and Municipal Employees filed five shareholder resolutions this season seeking an advisory vote on compensation committee reports.

The U.S. Sarbanes-Oxley Act (SOX), along with the implementing requirements that followed, represents another example of a standard with an impact that extends well beyond national borders. Investors from Canada, the U.K., Europe, and Australia all commented on SOX. In Canada, for instance, study participants from pension and mutual funds praised the legislation for improving financial reporting. In the U.K., however, an investment management interviewee derided the legislation as overly burdensome and urged, "Ditch Sarbanes-Oxley." Likewise, a German investment banker pointed to SOX as a regulation that Europe should avoid.

These comments indicate that investors throughout the world are taking notice of SOX, and their responses, positive or negative, are shaping the development of regulations and standards in their own countries.

In Australia, an investment management interviewee described the ripple effect that the legislation has had: "Members of our boards are also members of other boards. Some of those other companies are listed in the U.S. SOX has an impact on those companies that operate in the U.S. And it [influences] Australian regulations. So we must be interested. It filters through to our shareholders, too."

Investors also highlighted the impact of other regional and global standards. In France, for example, an asset manager pointed to the pull of pan-European standards in raising those in his own country. "Regarding corporate governance, the Netherlands, Belgium, and Luxembourg are much more advanced. Consequently, France should follow these countries," he explained.

In the U.K., an investment manager predicted that the standards embodied in the country's Combined Code on Corporate Governance would be implemented on a more global basis. And in his own country, he said that the International Financial Reporting Standards are "driving this need to take more action on financial goals and quality of audit."

And in Japan, investors emphasize the impact of global corporate governance standards and the role of international investors. "Our priority is improvement in Japan, but we are concerned that any deterioration of global standards could slow progress here in Japan," remarked an investment manager in Tokyo. Another Japanese asset manager commented, "We are interested in learning… how overseas investors' view of Japanese issuers might be changing."

Increase in Cross-Border Voting
Investors also are using the power of the ballot box to raise corporate governance standards overseas. The ISS study shows that investors in the U.S., Canada, and the U.K. are the most likely to cast proxy votes outside their home markets, with 73 percent of U.S., 67 percent of Canadian, and 60 percent of U.K. investors voting at least 50 percent of the shares they hold outside of their home market.

We also find anecdotal evidence that investors in other markets are increasing their cross-border voting as well. In Australia and New Zealand, fund officials told us that they were upgrading their global voting practices or were planning to do so in the future. Likewise, a Dutch asset manager observed: "Before, we had a proxy committee but did little voting. Starting in January 2005, we have had a global committee."

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