Comparing Corporate Governance Principles & Guidelines

Holly J. Gregory is a corporate partner specializing in corporate governance at Weil, Gotshal & Manges LLP. This post discusses a Weil Gotshal report by Ms. Gregory and Rebecca C. Grapsas, available here.

Although discussions continue to be robust about effective corporate governance practices, review of the aspirational governance principles and guidelines issued by influential board, management and investor affiliated associations and pension funds indicates significant areas of agreement. Areas of apparent agreement include, for example, the appropriate voting standard in director elections (majority voting in uncontested elections with a director resignation policy, plurality for contested elections), the need for some form of independent board leadership (whether in the form of an independent chair or lead or presiding director) and the importance of formal board evaluation processes.

The Comparison of Corporate Governance Principles & Guidelines from Weil, Gotshal & Manges LLP highlights the convergence in views about effective governance practices and structures, as well as remaining areas of disagreement, by providing a side-by-side look at suggestions for board structure and practice from influential players in the investor, board and management communities. The Comparison shows a range of structures and practices that are generally acceptable, while reflecting general agreement that “one size does not fit all.”

By lining up viewpoints from influential sources on a topic by topic basis, the Comparison is designed to support efficient research into leading views on governance practice, and can be used to benchmark a company’s governance practices. For example, a board that is considering implementing term limits or separating its CEO and chair positions can see at a glance how such practices are viewed by CalPERS, TIAA-CREF, the AFL-CIO, the Council of Institutional Investors and ISS. They can also consider guidance from the National Association of Corporate Directors, the Business Roundtable and the Conference Board. Similarly, shareholders can use the Comparison to gauge the degree to which a company has adopted practices that are generally favored among investors and proxy advisors. Academics and other researchers can use the Comparison to understand the degree of convergence and variation in viewpoints on governance practices.

The following governance principles and guidelines source materials are covered in the Comparison:

  • AFL-CIO Proxy Voting Guidelines
  • American Law Institute Principles of Corporate Governance
  • Business Roundtable Principles of Corporate Governance
  • CalPERS Global Principles of Accountable Corporate Governance
  • The Conference Board Commission on Public Trust and Private Enterprise Findings and Recommendations
  • Council of Institutional Investors Corporate Governance Policies
  • ISS 2012 U.S. Proxy Voting Guidelines
  • NACD Blue Ribbon Commission Report on Director Professionalism
  • OECD Principles of Corporate Governance
  • TIAA-CREF Policy Statement on Corporate Governance

The Comparison is structured along the lines of the Key Agreed Principles to Strengthen Corporate Governance for U.S. Publicly Traded Companies published by the NACD in 2008 (with input from the business and investor communities), with sections on:

  • 1. Board Responsibility for Governance
  • 2. Corporate Governance Transparency
  • 3. Director Competency & Commitment
  • 4. Board Accountability & Objectivity
  • 5. Independent Board Leadership
  • 6. Ethics, Integrity & Responsibility
  • 7. Attention to Information, Agenda & Strategy
  • 8. Protection Against Board Entrenchment
  • 9. Shareholder Input in Director Selection
  • 10. Shareholder Communications

This edition of the Comparison, which has been reissued periodically since its first publication almost 20 years ago, includes updated sections on “hot button” issues including proxy access, disclosure of charitable and political contributions, and risk management and oversight.

The full report is available here.

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