10 Fundamental Principles

by John R. Engen for Boardmember, First Quarter 2011.

After more than a year of meetings and hearings, the New York Stock Exchange Commission on Corporate Governance came up with the following 10 principles of good governance, listed here in abridged form.

  • The board’s fundamental objective should be to build long-term sustainable growth in shareholder value for the corporation.
  • A key aspect of successful governance depends upon the successful management of the company, as management has primary responsibility for creating an environment in which a culture of performance with integrity can flourish.
  • Shareholders’ voting decisions are one of the primary means of communicating with companies on issues of concern.
  • Good corporate governance should be integrated with a company’s business strategy and objectives and should not be viewed simply as a compliance obligation separate from long-term business prospects.
  • Legislation and agency rule-making are important to establish the basic tenets of corporate governance, [yet] the Commission has a preference for market-based governance solutions whenever possible.
  • Good corporate governance includes transparency for corporations and investors, sound disclosure policies, and communication beyond disclosure through dialogue and engagement as necessary and appropriate.
  • Companies must strike the right balance between the appointment of independent and non-independent directors to ensure boards have an appropriate range and mix of expertise, diversity, and knowledge.
  • Proxy advisory firms should be held to appropriate standards of transparency and accountability.
  • The SEC should work with the NYSE and other exchanges to ease the burden of proxy voting and communication while encouraging greater participation by individual investors in the proxy voting process.
  • The SEC and/or NYSE should consider a wide range of views to determine the impact of major corporate governance reforms on corporate performance over the last decade [and] should also periodically assess the impact of reforms on the promotion of sustainable, long-term corporate growth and profitability.

Download the Report of the New York Stock Exchange Commission on Corporate Governance for the full list of principles and 32-page report.


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