(Corporate Governance and Nominating Committee Requirements for Companies Listed on the New York Stock Exchange)
Independent directors must make up the majority of the board of directors of companies listed on the New York Stock Exchange. Those independent directors must meet at least once each year separately from management and other directors of the company. Also, there must be a publicly disclosed mechanism by which persons outside management may communicate with the independent directors.
Exchange rules also require that listed companies must have several committees composed entirely of independent directors. Rule 303A.04 of the New York Stock Exchange requires a corporate governance and nominating committee to set standards for corporate governance and to determine qualifications for appointment of independent directors to the board of directors.
The governance and nominating committee is required to have a written charter that sets out the duties and purposes of the committee. Those duties must include:
- Identification and selection or recommendation of persons who meet criteria set by the board of directors for serving on the board;
- Recommendations for corporate governance guidelines for adoption by the board of directors; and
- Oversight of evaluations of the board of directors, company management, and the committee’s own performance.
In addition to providing for annual evaluation of its own performance, the charter for the governance and nominating committee also sets qualifications and rules for appointment and removal of members of the committee. Provisions for committee structure, procedure, and reports to the board of directors also should be described in the committee charter.
Corporate governance standards that the committee must consider and recommend to the board of directors are described in New York Stock Exchange Rule 303A.09. The guidelines, which are disclosed to stockholders and the public, must provide:
- Qualifications and responsibilities of members of the board of directors, including requirements for independent directors;
- A description of access of directors to management and independent advisors;
- Provisions for director training and compensation;
- Policies for chief executive officer evaluation and succession; and
- Procedures for annual evaluations of the performance of the board of directors.