03 November 2005

US Business Roundtable on 'Best Practices' in Corporate Governance

The US Business Roundtable, representing CEOs of 160 of the largest corporations in America, released updated Principles of Corporate Governance, outlining core guidelines to help American public companies meet their corporate governance responsibilities more effectively. The Roundtable’s first Principles were released in May 2002 and have provided a set of best practices to U.S. corporations, helping to build shareholder confidence and public trust in American business.

Major changes reflected in the updated guidelines are:

Corporate governance laws and regulations: The updated principles reflect new legal and regulatory requirements resulting from the Sarbanes-Oxley Act of 2002 and strengthened securities market listing standards.

Board leadership: The principles emphasize the critical importance of independent board leadership and, in recognition of the fact that no one leadership structure is right for every corporation, outline various methods for providing independent leadership, from an independent chairman to a lead or presiding director that performs a range of functions. The Roundtable’s May 2005 survey showed that nearly 82% of member companies’ boards are at least 80% independent.

Executive sessions: The principles recommend placing time for an executive session of independent or non-management directors on the agenda for every regular board meeting, and follow-up with senior management at the conclusion of each executive session in order to maximize the effectiveness of these sessions.

Compliance: The principles include an expanded discussion of compliance that addresses the board’s role in compliance oversight and emphasizes the responsibility of the board and senior management for setting a “tone at the top” that establishes a culture of legal compliance and integrity.

Director-shareholder relations: The principles state that the board is responsible for responding to communications from shareholders and addressing issues of concern to shareholders, and contains an expanded set of best practice recommendations for boards in carrying out these responsibilities. In the May survey, 90% of Business Roundtable companies reported that they have established procedures for shareholder communications with directors.

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