ERHC Energy Inc (ERHE)

[nordicroots]

Thinking quite a bit lately about corporate governance issues in the context of some of the things going on here with ERHE. ISS is the outfit that holds themselves out as the global leaders on corporate governance, providing services aimed at enabling the financial community to manage governance risk for the benefit of shareholders. And in fact they are actually a service provider whose information is widely available to instituational and retail investors alike. You can even find their rankings on the Yahoo Finance page under the company profile section when looking at various company details.

I reviewed some of what they have for the big IOCs and even some of the smaller independents and find they all seem to consistenty rank fairly high in the categories they are rated in. For example:
Exxon Mobil Corporation’s ISS Governance QuickScore as of Apr 1, 2015 is 4.
The pillar scores are Audit: 1; Board: 6; Shareholder Rights: 2; Compensation: 7.
Chevron Corporation’s ISS Governance QuickScore as of Apr 1, 2015 is 1.
The pillar scores are Audit: 1; Board: 2; Shareholder Rights: 1; Compensation: 4.
ConocoPhillips’s ISS Governance QuickScore as of Apr 1, 2015 is 1.
The pillar scores are Audit: 2; Board: 2; Shareholder Rights: 6; Compensation: 7.
Marathon Oil Corporation’s ISS Governance QuickScore as of Apr 1, 2015 is 3.
The pillar scores are Audit: 2; Board: 4; Shareholder Rights: 4; Compensation: 4.
Devon Energy Corporation’s ISS Governance QuickScore as of Apr 1, 2015 is 6.
The pillar scores are Audit: 2; Board: 9; Shareholder Rights: 5; Compensation: 6.
Anadarko Petroleum Corporation’s ISS Governance QuickScore as of Apr 1, 2015 is 9.
The pillar scores are Audit: 2; Board: 1; Shareholder Rights: 6; Compensation: 10.
Energy XXI Ltd.’s ISS Governance QuickScore as of Apr 1, 2015 is 5.
The pillar scores are Audit: 2; Board: 4; Shareholder Rights: 4; Compensation: 8.
Continental Resources, Inc.’s ISS Governance QuickScore as of Apr 1, 2015 is 6.
The pillar scores are Audit: 1; Board: 9; Shareholder Rights: 7; Compensation: 5.
Oasis Petroleum Inc.’s ISS Governance QuickScore as of Apr 1, 2015 is 7.
The pillar scores are Audit: 2; Board: 7; Shareholder Rights: 7; Compensation: 6
Range Resources Corporation’s ISS Governance QuickScore as of Apr 1, 2015 is 5.
The pillar scores are Audit: 2; Board: 10; Shareholder Rights: 1; Compensation: 7.
Kosmos Energy Ltd.’s ISS Governance QuickScore as of Apr 1, 2015 is 7.
The pillar scores are Audit: 2; Board: 10; Shareholder Rights: 4; Compensation: 3


No big surprises with those. However, conspicuous by it absence when searching for information from ISS was anything coming up on the ERHE ticker symbol on the Yahoo Finance company profile page. I attributed that as being more than likely simply due to the micro cap size of the stock. Nevertheless, it prompted me to give a quick look at some of the factors that others (their industry peers) are rated on and several of the factors sort of jumped off the page at me based on a lot of the comments here over the past year or so and caused me to wonder how ERHE might rank compared to their larger industry peers - particularly in these areas:

ISS Quick Score is a comprehensive scoring based on multiple issues. Just to share this information with the board, I excerpted a number of select issues they examine relating to Corporate Governance:

318 - What is the dilution limit of the general mandate to issue shares?
321 - What is the aggregate dilution limit of share issuance and reissuance mandate?
128 - Is there a maximum level of dilution per year?
250 - What is the level of disclosure on CEO ownership guidelines
290 - - Does the company have a controlling shareholder?
78 - - Does the company have a poison pill (shareholder rights plan) in effect?
67 - Does the company have an ownership ceiling?
68 - Does the company have ownership ceilings for specific parties?
218 - Are there ownership factors that affect the takeover defenses?
345 - Has ISS' review found that the Board of Directors recently took action that materially reduces shareholder rights?
46 - Does the company disclose board/governance guidelines?
72 - Does the company have targeted stock placement that can be used as a takeover defense?
73 - Does the company maintain pre-emptive rights in the event of a takeover bid?
218 - Are there ownership factors that affect the takeover defenses?
78 - Does the company have a poison pill (shareholder rights plan) in effect?
145 - What proportion of the salary is subject to stock ownership requirements/guidelines for the CEO?

There were excerpts from an appendix listing factors they examine in various regions of the world when looking at various companies.
http://www.issgovernance.com/file/products/qs3-appendix-final.pdf

As this company navigates the current low oil price environment and gets out there and begins to drill and finds oil, there will undoubtedly be lots of growing pains as they wrestle with these sorts of corporate governance isues. I wonder if the current board of directors could do a self assessment and find themselves well aligned with the practices of the rest of their industry peers in many of these areas? At some point their historical approach for managing in each of these areas will have an impact on their ability to attract capital from the larger institutional buyers and they do look at these sorts of corporate governance issues.