NYSE Commission Announces Core Corporate Governance Principles

On Thursday, September 23rd, the New York Stock Exchange-sponsored commission on corporate governance issued a report that contained 10 core corporate governance principles. Even though these principles apply to public companies, private companies should also be aware of them and try to apply them on an ongoing basis. Apart from the principles themselves, the commission noted that:


- the objectives of a board of directors should be directed at long-term growth, and any measures by the management aimed at short-term stock price increases are inconsistent with the corporate governance principles of the company;

- it is not just the board’s responsibility to make sure that the company has sound corporate governance practices, but importantly it is the management’s responsibility to create an environment where these principles are created, respected and fostered;

- a board of directors should be comprised of a mix of independent directors and those who are not independent, so that all points of view can be presented and considered; and

- best corporate governance principles are those that are created by the market itself (ie, other companies), not those that are dictated from above by a rule-making authority.

I am copying below the 10 core principles from the NYSE news release:

• The Board’s fundamental objective should be to build long-term sustainable growth in shareholder value for the corporation;

• Successful corporate governance depends upon successful management of the company, as management has the primary responsibility for creating a culture of performance with integrity and ethical behavior;

• Good corporate governance should be integrated with the company’s business strategy and not viewed as simply a compliance obligation;

• Shareholders have a responsibility and long-term economic interest to vote their shares in a reasoned and responsible manner, and should engage in a dialogue with companies thoughtful manner;

• While legislation and agency rule-making are important to establish the basic tenets of corporate governance, corporate governance issues are generally best solved through collaboration and market-based reforms;

• A critical component of good governance is transparency, as well governed companies should ensure that they have appropriate disclosure policies and practices and investors should also be held to appropriate levels of transparency, including disclosure of derivative or other security ownership on a timely basis;

• The Commission supports the NYSE’s listing requirements generally providing for a majority of independent directors, but also believes that companies can have additional non-independent directors so that there is an appropriate range and mix of expertise, diversity and knowledge on the board;

• The Commission recognizes the influence that proxy advisory firms have on the markets, and believes that it is important that such firms be held to appropriate standards of transparency and accountability;

• The SEC should work with exchanges to ease the burden of proxy voting while encouraging greater participation by individual investors in the proxy voting process;

• The SEC and/or the NYSE should periodically assess the impact of major governance reforms to determine if these reforms are achieving their goals, and in light of the many reforms adopted over the last decade the SEC should consider the expanded use of “pilot” programs, including the use of “sunset provisions” to help identify any implementation problems before a program is fully rolled out.

Here is a link to the press release: http://www.nyse.com/press/1285236224629.html

Here is a link to the full commission report: http://www.nyse.com/pdfs/CCGReport.pdf