BRW ... report by Neil Shoebridge

Hmmm... BRW Daily


"Getting tough on boards
By Neil Shoebridge, managing editor
Friday, June 7, 2002

As the controversy surrounding corporate governance, accounting standards, auditing and so on rolls on here and in the United States, the New York Stock Exchange (NYSE) has released a set of rules designed to restore investor confidence in the aftermath of the collapse of Enron Corporation and the problems that have swamped other companies this year. Australian regulators, companies and investors should study the new rules, which represent a significant step forward in corporate governance.

Responding to a request from the United States Securities and Exchange Commission to review its listing standards, the NYSE has created new rules that move power away from management and into the hands of independent directors.

In Australia, recent difficulties at companies such as Mayne Group - and the revelations emerging from the HIH Insurance royal commission on how the board of FAI Insurance operated - highlight the problem of having a board dominated by senior management. The US has experienced similar problems, and the NYSE believes it has come up with a solution.

"There are periodic moments of madness," Richard Grasso, the chairman of the NYSE, told The Washington Post overnight. "But bad people and bad practices will be rid from the system and we will return to the norm."

The proposed new rules include:

* Independent directors must account for the majority of directors on the boards of the 3000 companies listed on the NYSE.

* Independent directors must be the only members of a company's audit and compensation committees.

* Companies must allow shareholders to vote on any stock option compensation plans.

The NYSE would have three levels of punishment for companies that do not introduce the changes: a formal letter of reprimand, a suspension from trading, and explusion from the exchange.

The new rules are open for public comment for two months. They will be amended after the two-month review period and then voted on by the NYSE's board. After the new rules are introduced, companies will have two years to comply, but the NYSE hopes that they will start making changes immediately to please their investors. The NYSE estimates that at least 40% of the companies on its board do not comply with the proposed new rules."


This is only my view ... read the red stuff.