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21 Dec. 2009 | Comments (0)

A recent online discussion on good corporate governance I had with members of Dan Swanson's Yahoo corporate governance discussion group I belong to got me thinking. It’s a good time to start looking at what thought leadership there is on corporate governance principles. There is quite a lot of good white papers, articles and online discussion e-mail threads. While I won’t share the e-mail threads for obvious reasons, I would suggest joining some of the groups out there. Now is the time for people in the corporate governance space to talk to each other and share ideas. I must admit that as I started reading material for this post, I noticed most of what is out there on corporate governance principles is from overseas (namely the United Kingdom, other European countries and Australia). As for what I am going to share with you this week, here it is: •    Some Thoughts for Boards of Directors in 2010, Martin Lipton, partner; Steven A. Rosenblum, partner; and Karessa L. Cain, associate, Wachtell, Lipton, Rosen & Katz. Nov. 30, 2009. http://www.directorship.com/media/2009/12/Some-Thoughts-for-Boards-of-Directors-in-2010-1.pdf. Key findings: This annual outlook is a 32-page report that stresses there is no one-size-fits-all approach to crafting a successful board. It also offers recommendations for key areas of concentration including CEO Succession Planning, Long-Term Strategy and Monitoring Performance and Compliance. “Some are perennial themes that remain relevant and deserve to be re-emphasized from year to year, whereas others have recently come into particular focus,” the authors say. •    Corporate Governance: Platitudes, Principles or Best Practices,  Joan Conrod, Professor, Dalhousie University; and Steven Salterio, Professor, Queen’s University. March 1, 2009. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1490131. Key findings: This study by two Canadian professors found that Toronto Stock Exchange registrants have abided by the new principles-based approach to governance put into place by the Canadian Securities Administrators. Since 2005 corporate governance disclosure requirements for Canadian public companies have been set by the Canadian Securities Administrators. The requirements are essentially a system of voluntary compliance with “best practices” but with mandatory disclosure of compliance or explanation of how it complied “in principle.” A company would be compliant if “best practices” were not followed, as long as compensating disclosure was made about the alternative approach taken. Their study featured 307 TSX registrants and 148 TSX Venture registrants. They found the non-compliance rate for TSX firms ranged from 11% to 20%, using the lenient test of whether the company ignored the requirement to disclose and explain the company’s approach alternative approach to governance if they did not comply with best practices. •    Key Agreed Principles, National Association of Corporate Directors, Oct. 16, 2008. https://secure.nacdonline.org/StaticContent/StaticPages/DM/NACDKeyAgreedPrinciples.pdf. Key findings: In an effort to recognize significant areas of common agreement and interest and to move beyond highly prescriptive and rigid recommendations of best practice for publicly traded companies, the NACD puts forth 10 key principles to strengthen corporate governance in such areas as board responsibility, transparency, director accountability, and independent boards. The Key Agreed Principles reflect the distillation and articulation of fundamental principles-based aspects of governance on which there appears to be broad consensus. They are intended to describe the current baseline consensus and thereby to help improve the quality of discussion and debate about governance issues that have not yet gained consensus. •    Institutional Investors and Corporate Governance Reform, Corporate Governance blog, Bob Tricker and Chris Mallin, authors of Corporate Governance: Principles, Policies and Practices, Dec. 4, 2009. http://corporategovernanceoup.wordpress.com/2009/12/04/institutional-investors-and-corporate-governance-reform/. Key findings: Corporate governance codes and guidelines have long recognised the important role that institutional investors have to play in corporate governance.  As well as being influential in their home countries, institutional investors have increasingly become a more significant force in other countries through their cross-border holdings. Recent corporate governance reforms motivated by the global financial crisis have placed even more emphasis on the role of institutional investors. •    A review of corporate governance in UK banks and other financial industry entities: Final recommendations, Sir David Walker, reviewer of British bank governance. Nov. 16, 2009. http://www.hm-treasury.gov.uk/d/walker_review_261109.pdf. Key findings: In his report to the British prime minister, Sir Walker found that regulation will make banks and financial institutions safer but cannot assure that they will be attractive to investors and thus able to strengthen their balance sheets other than on very expensive terms. For its part, better corporate governance of banks cannot guarantee that there will be no repetition of the recent highly negative experience for the economy and society as a whole. The challenge will be to find the right balance with materially enhanced supervision and regulation to ensure safety and soundness.
  • About the Author:Gary Larkin

    Gary Larkin

    Gary Larkin is a research associate in the corporate leadership department at The Conference Board in New York. His research focuses on corporate governance, including succession planning, board compo…

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