The New York Stock Exchange's Commission on Corporate Governance released areport last week that identified core governance principles it believed could be widely accepted and supported by issuers, investors, directors and other market participants. The Commission, formed in response to the financial crisis of 2008 and 2009, considered numerous issues, including the proper role and scope of a director's authority, management's responsibility for governance and the relationship between a shareholder's trading activities, voting decisions and governance.
Ultimately, the Commission achieved a consensus on ten principles, namely:
- The board’s fundamental objective should be to build long-term sustainable growth in shareholder value for the corporation and the board is accountable to shareholders for its performance in achieving this objective;
- Successful corporate governance depends on successful management of the company, as management has the primary responsibility for creating a culture of performance with integrity and ethical behavior;
- .Shareholders have a right, responsibility and long-term economic interest to vote their shares in a thoughtful manner and voting decisions are one of the primary means of communicating with companies on issues of concern;
- .Good corporate governance should be integrated with the company’s business strategy and not viewed as simply a compliance obligation;
- While legislation and agency rule-making are important to establish the basic tenets of corporate governance, corporate governance issues are generally best solved through market-based governance solutions;
- Good corporate governance includes transparency for corporations and investors, sound disclosure policies and communication beyond disclosure through dialogue and engagement as necessary and appropriate;
- While the Commission supported the NYSE’s listing requirements generally providing for a majority of independent directors, it also stated 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 recognized the influence that proxy advisory firms have on the markets, and stated the importance of such firms being held to appropriate standards of transparency and accountability;
- The SEC should work with exchanges to ease the burden of proxy voting and communication while encouraging greater participation by individual investors in the proxy voting process; and
- 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.
Whether the report influences regulators on the topic of corporate governance remains to be seen and in Canada, corporate governance has remained a hot topic. From a regulation standpoint, the Canadian Securities Administrators are still considering whether to recommend changes to the corporate governance regime.