Johnson, left, and Wehby
JUST AS stock exchanges are asking their listed companies to meet corporate governance standards that reflect the highest standards of ethics and transparency, so too must stock exchanges demand the same standards of themselves.
This is how new US Securities and Exchange chairman, William H. Donaldson, got the attention of the New York Stock Exchange and NASDAQ, in a letter dated March 26, this year, in which he asked that they provide, by May 15, a report outlining their exchange's own corporate governance practices.
MORE IMPORTANT
In his letter, Donaldson went on to say that it had become "more important than ever that self-regulatory organisations be examples of good governance," reflecting best practices in areas such as "board structure, representation and oversight of management policies to ensure that they serve the public well."
On June 5, the New York Stock Exchange Board made public its decision to adopt the initial recommendations of its Special Committee on Governance of the NYSE, which is made up of non-industry directors, "as a swift, first step towards strengthening the Exchange's own governance," according to NYSE chairman and CEO, Dick Grasso.
10 INITIAL RECOMMENDATIONS
The Special Committee's 10 initial recommendations are as follows:
1. Revise the composition of the Compensation Committee to include only non-securities industry directors.
2. Publish the Compensation Committee's report each year in the Exchange's annual report.
3. Prohibit service by NYSE senior officers on the boards of listed companies.
4. Separate the Audit and Finance Committees.
5. Establish a standing five-member governance committee for on-going review of the NYSE's governance, to include three non-industry directors, one of whom must chair the committee.
6. Require that the committee act by a majority of non-industry directors.
7. A director who is the CEO of a bank holding company that has a broker-dealer subsidiary that does business with the public cannot be considered a non-industry director.
8. Adopt and post on nyse.com written governance principles to formalise and establish these and other best practices.
9. Codify the NYSE's current ethics requirements for its directors and post the code on nyse.com.
10. Post the NYSE board committee charters and membership on nyse.com.
At the same time, the NYSE's "New Standards and Changes in Corporate Governance Practices for Listed Companies," originally recommended by the Exchange's Corporate and Listing Standards (CALS) Committee is still under review by the SEC. The new standards, which underwent intensive industry and public review and commentary, were adopted by the Exchange on June 6, 2002, submitted to the SEC on August 16, 2002 and amended by the NYSE on April 4, 2003.
A principal recommendation of NYSE's proposed corporate governance practices is that a majority of the board of all listed companies be made up of independent directors. At the same time, the definition of "independent director" is to be tightened in order to ensure they are truly independent.
JAMAICA STOCK EXCHANGE AND CORPORATE GOVERNANCE
In introducing the topic of corporate governance at the Jamaica Stock Exchange Council's retreat April 5 - 7, this year, JSE chairman Roy Johnson said: "Our deliberations on corporate governance provides us with an opportunity to set our own house in order first. We have to ensure that our house is in order and then determine the process by which we shall engage the listed companies to adopt what shall be required of them."
As a consequence of this, a working group on corporate governance was set up within the JSE's Exchange Development Committee, with the mandate to recommend draft corporate governance best practices for the Jamaica Stock Exchange by July 31.
The working group consists of Roy Johnson; Don Wehby, financial director, Grace, Kennedy & Company; Leo Williams, general manager, JMMB, and Ed McKie, managing director, M/VL Limited. JSE deputy general manager, Marlene Street, and communications consultant to the JSE, Dr. Lloyd Hunter, assist the group.
TRAINING PROGRAMME
"We do not intend to re-invent the wheel. We will consult best practices elsewhere and we will collaborate with the Private Sector Organisation of Jamaica which, for the last two years, has conducted an effective corporate governance training programme in association with the Commonwealth Associa-tion of Corporate Governance," Johnson said. "But we will end up with a set of corporate governance principles and practices that are geared specifically to the requirements and the objectives of the Jamaica Stock Exchange."
This column is part of the on-going public education programme of the Council of the Jamaica Stock Exchange
