The New York Stock Exchange plans to file a rule change with the Securities and Exchange Commission either this week or next week to clarify disclosure requirements related to the independence of board directors, NYSE officials said.
The Exchange is also considering an indicator that would flag companies that are out of compliance with its governance standards.
The proposed rule change intends to modify Section 303A of the Listed Company Manual to further clarify what the Big Board expects to see in listed companies’ independence determination disclosures. Under NYSE governance standard, boards are required to have a majority of independent directors.
Under Section 303A of the NYSE’s Listed Company Manual, listed companies must identify which directors are independent and disclose the basis for that determination in their annual proxy statement or, if they don’t file an annual proxy statement, in their annual report filed with the SEC. Even if a director meets all of the bright line independence criteria, the board is required to make an affirmative determination that the director has no material relationship with the listed company.
O’Neill
While she noted that “some companies have done an outstanding job” complying with that requirement, Janice O’Neill, NYSE vice president of listed company compliance, said, “Others have not been as complete.”
“Our rules on disclosure for determination of director independence could have been clearer,” O’Neill added. “We’re not changing the rules. We’re clarifying what we want to see disclosed.”
She noted that the bright line standards for director independence will remain the same. O’Neill said the NYSE hopes the forthcoming rule proposal will be approved in time for the next proxy season.
In addition, the NYSE is “considering adopting a governance indicator similar to the late filer indicator for listed companies,” O’Neill said.
The indicator would be applied if a company fell out of compliance with NYSE governance standards. For example, if a listed company is missing a majority of independent directors for more than six months, the NYSE would put an indicator on their symbol. The NYSE would also have a list of those companies on its Web site.
O’Neill said the proposal “is still under consideration.” She said the NYSE is “in discussions with the SEC about this,” but that no timeframe has been set.
Related standards, coverage and commentary are available from the box above, right.
No comments yet