vol. XV no. 3

				In June, the NYSE released recommendations to raise corporate governance and disclosure standards. The exchange undertook a revision of its listing standards in response to recent calls for reform and at the request of SEC (Securities and Exchange Commission) Chairman Harvey Pitt. Its goal was to enhance the accountability, integrity and transparency of its listed companies. In announcing the proposed changes, the NYSE explained that the "recommendations are designed to further the ability of honest and well-intentioned directors, officers and employees to perform their functions effectively. Our recommendations will also allow shareholders to more easily and efficiently monitor the performance of companies and directors in order to reduce instances of lax and unethical behavior." A key change in the proposal called for increasing the role and authority of independent directors. Under the proposed guidelines, independent directors must compose a majority of a company's board, and boards must convene regular executive sessions in which non-management directors meet without management. Additionally, listed companies must have an audit committee, a nominating committee and a compensation committee, each made up solely of independent directors. The chair of the audit committee must have accounting or financial management experience, and the audit committee must have sole responsibility for hiring and firing the company's independent auditors. The second proposal tightened the definition of "independent" director, requiring boards to affirmatively determine that a director has no material relationship with the listed company. Furthermore, the NYSE recommended a five-year cooling-off period for former employees of the listed company or its independent auditors, wherein those employees must refrain from engaging in the running of the company. Additionally, director's fees must be the sole compensation received by an audit committee member from the listed company. Another recommendation fostered a focus on good corporate governance by requiring listed companies to adopt not only corporate governance guidelines but also charters for their audit, compensation and nominating committees. Listed companies likewise would be required to adopt a code of business conduct and ethics under the proposal. Giving shareholders more opportunity to monitor and participate in the governance of their companies was another emphasis of the guidelines. Shareholders must be given an opportunity to vote on all equity-based compensation plans. Listed companies must publish codes of business conduct and ethics as well as key committee charters, with waivers of such codes for directors or executive officers being promptly disclosed. Listed foreign private issuers must disclose any significant ways in which their corporate governance practices differ from NYSE listing standards. The proposals also sought to establish new control and enforcement mechanisms, requiring the CEO of each listed company to certify annually that the company has established and complied with procedures for verifying the accuracy and completeness of information provided to investors. CEOs also must certify annually that they are unaware of any company violations of the NYSE listing standards. After adoption by the NYSE, the proposed new regulations were sent to the SEC for approval in August. Top | Back to Rules of Integrity

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