Key Principles for Strengthening Corporate Governance

Editor’s Note: The NACD, in its report, acknowledges the extraordinary and pro bono efforts of Ira Millstein and Holly Gregory and their colleagues at Weil, Gotshal & Manges LLP for their assistance with preparation of the principles.

The National Association of Corporate Directors, with the support of the Business Roundtable, recently released Key Agreed Principles for Strengthening Corporate Governance. The Principles identify the core areas that boards, management and shareholders agree should be the basis for good corporate governance and cover topics including independent board leadership, protecting against entrenchment of the board, shareholder participation in corporate decision making, and board communication with shareholders. In recognition of the legitimate concerns that exist about the rigid and prescriptive use of best practice recommendations by some proponents, the Principles are intended to reflect a distillation and articulation of fundamental principles-based aspects of governance on which there appears to be broad consensus. They are also intended to stimulate informed debate about issues on which consensus does not yet exist.

The International Corporate Governance Network, a global network of institutional investors, has welcomed the Principles, emphasizing that “[t]his is a good start which we believe should encourage further discussion on how to improve practice in corporate governance and develop much better understanding between companies and the shareholders who own them. The ICGN believes this is a constructive way towards long term value creation, which has become all the more important in the light of the current economic crisis.”

The principles are available here. A comparison of Significant Views on Corporate Governance Best Practice, which is Appendix A to the report, is available here. A comparison of Sarbanes Oxley, SEC and Listing Rule provisions related to the composition and functioning of the board of directors of a publicly traded company, Appendix B to the report, is available here.

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