NYSE Proposes Amendments to Corporate Governance Listing Standards
September 14, 2009
On August 26, 2009, the NYSE filed a proposal with the SEC to amend the corporate governance listing standards in Section 303A of the NYSE Listed Company Manual. If approved by the SEC, the proposed rules would take effect on January 1, 2010. The following is a summary of the proposals.
- Corporate Governance Disclosure. To avoid duplication and confusion, the proposed rules would eliminate each disclosure requirement currently in Section 303A that is also required by Item 407 of Regulation S-K, including those relating to the controlled company exemption, director independence, and compensation and audit committee reports. The proposed rules would incorporate directly into Section 303A the applicable disclosure requirements of Item 407.
- Independence Standards. The proposed rules would clarify that with respect to the independence standards, references to a listed company include any parent or subsidiary in a consolidated group with the listed company.
- Meetings of Non-Management Directors. The proposed rules would clarify that holding regular executive sessions of only “independent” directors will satisfy the requirement that listed companies hold regular meetings of “non-management” directors. The proposed rules would also clarify that all interested parties, not only shareholders, must be able to communicate their concerns to the presiding director, or the non-management or independent directors as a group.
- Audit Committee. The proposed rules would clarify that if an audit committee member simultaneously serves on the audit committees of more than three public companies, the board must determine that such service does not impair the ability of the director to serve on the company’s audit committee and must disclose such determination.
- Code of Business Conduct and Ethics. The proposed rules would require disclosure of any waiver of the code of business conduct and ethics within four business days of such determination, rather than the two to three days provided in Question G-1 of the NYSE’s Frequently Asked Questions, by press release, website disclosure or filing a Form 8-K with the SEC.
- Certification Disclosure. The proposed rules would eliminate the requirement that listed companies disclose in their annual reports that they filed the CEO certification required by Section 303A12(a). Also, the proposed rules would require listed companies to notify the NYSE if an executive officer becomes aware of any non-compliance with Section 303A, as opposed to requiring notification in the event of “material non-compliance,” as currently required.
- Transition Periods. The proposed rules would revise the phase-in periods for companies listing in conjunction with an initial public offering, spin-off or carve out. In addition, the proposed rules would detail the compliance requirements for companies that list upon emergence from bankruptcy, transfer from another market, cease to be a controlled company, or cease to be a foreign private issuer.
- Website Disclosure. The proposed rules would allow listed companies to make certain disclosures on the company’s website, rather than in its annual proxy statement or annual report. These disclosures include:
– contributions by the listed company to any tax-exempt organization in which an independent director serves as an officer
– identity of the presiding director at executive sessions of non-management or independent directors, or the procedures by which the presiding director is selected
– the method for interested parties to communicate directly with the presiding director or the non-management or independent directors as a group
– the board’s determination that the service of an audit committee member on more than three public company audit committees does not impair the ability of the audit committee member to serve effectively on the listed company’s audit committee
The proposed rules would also eliminate the requirement to disclose that hard copies of the charters, corporate governance guidelines, and code of business conduct and ethics are available in print upon request believing it unnecessary when these documents are readily accessible on the company’s website.
http://apps.nyse.com/commdata/pub19b4.nsf/docs/546B33FFED743CD08525761F004CB2C1/$FILE/NYSE-2009-89.PDF
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