Corporate Governance Survey

NYSE Corporate Governance Proposals: A Financial Executive Checklist

Financial Executives Research Foundation

NYSE Corporate Governance Proposals, Section 303A Approved August 1, 2002,and submitted to SEC Financial Executive Checklist Brought to you by the FEI Research Foundation—This download is free to FEI members at http://www.fei.org/rfbookstore, but we ask you to make a tax-deductible contribution to the Foundation at http://www.fei.org/rf/donation.cfm.

Description

Effective Date

Sarbanes-Oxley Act Section/Other Reference

1. Listed companies must have a majority of independent directors.

Upon SEC approval

N/A

2. In order to tighten the definition of “independent director” for the purposes of these standards: a. No director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the listed company. Companies must disclose these determinations. b. No director who is a former employee of the listed company can be “independent” until 5 years after the employment has ended. c. No director who is, or in the past 5 years has been, affiliated with a present or former auditor of the company can be “independent” until 5 years after the end of the auditing relationship. d. No director can be “independent” if he or she is, or in the past 5 years has been, part of an interlocking directorate in which an executive officer of the listed company serves on the compensation committee of another company that concurrently employs the

Upon SEC approval

N/A

Company Practice/ Action/ Resolution

NYSE Corporate Governance Proposals, Section 303A Approved August 1, 2002,and submitted to SEC Financial Executive Checklist Brought to you by the FEI Research Foundation—This download is free to FEI members at http://www.fei.org/rfbookstore, but we ask you to make a tax-deductible contribution to the Foundation at http://www.fei.org/rf/donation.cfm.

Description

Effective Date

Sarbanes-Oxley Act Section/Other Reference

director. e. Directors with immediate family members in the foregoing categories are likewise subject to the 5year “cooling off” provisions for purposes of determining “independence.” 3. To empower non-management directors to serve as a more effective check on management, the nonmanagement directors of each company must meet at regularly scheduled sessions without management. 4. Nominating/corporate governance committee: a. Listed companies must have a nominating/corporate governance committee composed entirely of independent directors; b. The committee must have a written charter that addresses the committee’s purpose, its goals and responsibilities, and an annual performance evaluation of the committee;

Within six months of SEC approval

N/A

Within six months of SEC approval

N/A

5. Compensation committee: a. Listed companies must have a compensation committee composed entirely of independent

Within six months of SEC approval

N/A

Company Practice/ Action/ Resolution

NYSE Corporate Governance Proposals, Section 303A Approved August 1, 2002,and submitted to SEC Financial Executive Checklist Brought to you by the FEI Research Foundation—This download is free to FEI members at http://www.fei.org/rfbookstore, but we ask you to make a tax-deductible contribution to the Foundation at http://www.fei.org/rf/donation.cfm.

Description

Effective Date

Sarbanes-Oxley Act Section/Other Reference

Upon SEC approval

301

Within six months of SEC approval

a) 301(2) 202 b) 301 (3) c) Implied in 301(1)

directors; b. The committee must have a written charter that addresses the committee’s purpose, the committee’s duties and responsibilities, and an annual performance evaluation of the committee. 6. Add to the “independence” requirement for audit committee membership the requirement that director’s fees are the only compensation a committee member may receive from the company. 7. Audit committee: a. Increase the authority and responsibility of the audit committee, including granting it the sole authority to hire and fire independent auditors, and to approve any significant non-audit relationship with the independent auditors. b. The audit committee must have a written charter that addresses the committee’s purpose, its duties and responsibilities, and an annual performance evaluation of the audit committee. c. Each listed company must have an internal audit function.

Company Practice/ Action/ Resolution

NYSE Corporate Governance Proposals, Section 303A Approved August 1, 2002,and submitted to SEC Financial Executive Checklist Brought to you by the FEI Research Foundation—This download is free to FEI members at http://www.fei.org/rfbookstore, but we ask you to make a tax-deductible contribution to the Foundation at http://www.fei.org/rf/donation.cfm.

Description

Effective Date

7. (continued) The duties and responsibilities of the audit committee must be, at a minimum, to: a. Retain and terminate the company’s independent auditors. b. At least annually, obtain and review a report by the independent auditor describing: the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (to assess the auditor’s independence) all relationships between the independent auditor and the company. c. Discuss the annual audited financial statements and quarterly financial statements with management and the independent auditor, including the company’s MD&A disclosures. d. Discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.

Within six months of SEC approval

Sarbanes-Oxley Act Section/Other Reference

a) 301 b) 404 management responsibility c-j) not explicitly in Act

Company Practice/ Action/ Resolution

NYSE Corporate Governance Proposals, Section 303A Approved August 1, 2002,and submitted to SEC Financial Executive Checklist Brought to you by the FEI Research Foundation—This download is free to FEI members at http://www.fei.org/rfbookstore, but we ask you to make a tax-deductible contribution to the Foundation at http://www.fei.org/rf/donation.cfm.

Effective Date

Sarbanes-Oxley Act Section/Other Reference

8. To increase shareholder control over equitycompensation plans, shareholders must be given the opportunity to vote on all equity-compensation plans, except inducement options, plans relating to mergers or acquisitions, and tax qualified and excess benefit plans.

Upon SEC approval

N/A

9. Listed companies must adopt and disclose corporate governance guidelines. The following subjects must be addressed in the guidelines: • Director qualification standards.

Within six months of SEC approval

N/A

Description e. As appropriate, obtain advice and assistance from outside legal, accounting, or other advisors. f. Discuss policies with respect to risk assessment and management. g. Meet separately, periodically, with management, with internal auditors, and with independent auditors. h. Review with the independent auditor any audit problems or difficulties and management’s response. i. Set clear hiring policies for employees or former employees of the independent auditors. j. Report regularly to the board of directors.

Company Practice/ Action/ Resolution

NYSE Corporate Governance Proposals, Section 303A Approved August 1, 2002,and submitted to SEC Financial Executive Checklist Brought to you by the FEI Research Foundation—This download is free to FEI members at http://www.fei.org/rfbookstore, but we ask you to make a tax-deductible contribution to the Foundation at http://www.fei.org/rf/donation.cfm.

Description • • • • • •

Effective Date

Sarbanes-Oxley Act Section/Other Reference

Director responsibilities. Director access to management and independent advisors. Director compensation. Director orientation and continuing education. Management succession. Annual performance evaluation of the board.

10. Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers, and employees, and promptly disclose any waivers of the code for directors or executive officers. All listed companies should address the following topics: • Conflicts of interest. • Corporate opportunities. • Confidentiality. • Fair dealing. • Protection and proper use of company assets. • Compliance with laws, rules, and regulations. • Encouraging the reporting of any illegal or unethical behavior.

Within six months of SEC approval

406

Company Practice/ Action/ Resolution

NYSE Corporate Governance Proposals, Section 303A Approved August 1, 2002,and submitted to SEC Financial Executive Checklist Brought to you by the FEI Research Foundation—This download is free to FEI members at http://www.fei.org/rfbookstore, but we ask you to make a tax-deductible contribution to the Foundation at http://www.fei.org/rf/donation.cfm.

Sarbanes-Oxley Act Section/Other Reference

Description

Effective Date

11. Listed foreign private issuers must disclose any significant ways in which their corporate governance practices differ from those followed by domestic companies under NYSE listing standards.

Within six months of SEC approval

N/A

12. Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards.

Within six months of SEC approval

N/A

13. The NYSE may issue a public reprimand letter to any listed company that violates an NYSE listing standard.

Upon SEC approval

N/A

Company Practice/ Action/ Resolution