Our initial study focused on the five years around the global financial crisis (GFC) period: the lead up, the crisis itself, the aftermath, and recovery. The year 2008 was the second worst year in the markets over the past century, with only 1932 being worse, when the world was in the grip of the Great Depression. We hypothesized that stronger forms of governance would win the day, and those organizations would weather the storm better than those with weaker forms of governance. Our findings support that governance is highly relevant in driving financial outcomes. Some organizations do exceptionally well, but most, about 60%, do at or below the average. For our study period, the top end of the scale was 15% annualized returns and the bottom, −4.5%. In dollar terms there was a vast difference: approximately $1.6 billion per year on average.
Besides such financial impacts, governance also keeps the organization in line and conforming to norms, that is, no criminal acts, no self-dealing, no pay-to-play, and so on. We analyzed 2500 litigation cases over the five-year period to come up with a legal index of performance, and the first complete taxonomy of litigation case types in the public pension world, ranging from minor denial of benefits cases to Securities and Exchange Commission Cease and Desist orders.