- Committee Representing Broad Group of Investors, Issuers, Broker-Dealers, Governance and Proxy Experts Defines 10 Core Principles of Corporate Governance -
NYSE-Sponsored “Commission on Corporate Governance” Outlines Key Governance Principles
NEW YORK , Sept. 23, 2010 – NYSE Euronext (NYX) today released the final report of the NYSE–sponsored Commission on Corporate Governance. The Commission on Corporate Governance, chaired by Larry W. Sonsini, Chairman of Wilson Sonsini Goodrich & Rosati, is a diverse and independent commission established in the fall of 2009 to examine core governance principles that could be widely supported by issuers, investors, directors and other market participants.
The report is the result of nearly a year-long process, including a detailed review of the governance changes which have occurred over the past decade. The report identified 10 core governance principles covering the scope of the board’s authority, management’s responsibility for governance and the relationship between shareholders’ trading activities, voting decisions and governance. The findings of the Commission include that:
- The Board’s fundamental objective is to build long-term sustainable growth in shareholder value, and thus corporate policies that encourage excessive risk-taking for the sake of short-term increases in stock price are inconsistent with sound corporate governance.
- Corporate management has a critical role in corporate governance, as management has the primary responsibility for creating an environment in which a culture of performance with integrity can flourish.
- While independence is an important attribute for board members, the NYSE’s Listing Standards do not limit a board to just one non-independent director, and boards should seek an appropriate balance between independent and non-independent directors to ensure a proper mix of expertise, diversity and knowledge.
- While legislation and agency rule-making are important to establish the basic tenets of corporate governance, the Commission believes that over-reliance on legislation and agency rule-making may not be in the best interests of shareholders, companies or society, and the Commission therefore has a preference for market-based governance solutions whenever possible.
“The principles outlined by the Commission on Corporate Governance are a significant contribution to understanding the core duties and responsibilities of boards, management and shareholders in the governance process, and provides an important framework outlining the common interests of these groups,” said Mr. Sonsini. “Reaching agreement on core corporate governance principles between such a wide variety of stakeholders is an important achievement, especially at a time when legislative bodies and rule-making agencies are considering fundamental changes to the ways corporations are governed.”
“This initiative is the result of outstanding work by leading topic experts and we are grateful for their contributions,” said Duncan Niederauer, Chief Executive Officer, NYSE Euronext. “The report sets forth basic principles that will help guide issuers, investors and market participants, and provides a detailed history of the corporate governance changes that have occurred over the last decade, providing a framework for future debate.”
The 10 core principles outlined by the NYSE-sponsored Commission on Governance are as follows:
- 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.
Today’s report formally concludes the work of the NYSE Commission on Corporate Governance, though from time to time it will continue to provide constructive inputs into the corporate governance and proxy reform Process.
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About NYSE Euronext
NYSE Euronext (NYX) is a leading global operator of financial markets and provider of innovative trading technologies. The company's exchanges in Europe and the United States trade equities, futures, options, fixed-income and exchange-traded products. With approximately 8,000 listed issues (excluding European Structured Products), NYSE Euronext's equities markets – the New York Stock Exchange, NYSE Euronext, NYSE Amex, NYSE Alternext and NYSE Arca – represent one-third of the world's equities trading, the most liquidity of any global exchange group. NYSE Euronext also operates NYSE Liffe, one of the leading European derivatives businesses and the world's second-largest derivatives business by value of trading. The company offers comprehensive commercial technology, connectivity and market data products and services through NYSE Technologies. NYSE Euronext is in the S&P 500 index, and is the only exchange operator in the S&P 100 index and Fortune 500. For more information, please visit: http://www.nyx.com.
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