In response to the current economic crisis and the loss of confidence particularly in American corporations, the National Association of Corporate Directors (NACD) has published a new set of guidelines titled “Key Agreed Principles to Strengthen Corporate Governance for U.S Publicly Traded Companies.”
“These principles do not in any way undermine or negate further discussion, debate, and development of governance practices. We hope that the agreed principles will encourage boards, managers, and shareholders to eschew a check-the-box approach in favor of thoughtful governance, tailored by boards themselves to their particular circumstances and embraced by all stakeholders,” wrote NACD president and CEO Kenneth Daly in an introductory letter.
The principles, drafted pro bono by Ira Millstein and Holly Gregory and colleagues at Weil, Gotshal & Manges, are as follows:
1. Board responsibility for governance: Governance structures and practices should be designed by the board to position the board to fulfill its duties effectively and efficiently.
2. Corporate governance transparency: Governance structures and practices should be transparent— and transparency is more important than strictly following any particular set of best practice recommendations.
3. Director competency and commitment: Governance structures and practices should be designed to ensure the competency and commitment of directors.
4. Board accountability and objectivity: Governance structures and practices should be designed to ensure the accountability of the board to shareholders and the objectivity of board decisions.
5. Independent board leadership: Governance structures and practices should be designed to provide some form of leadership for the board distinct from management.
6. Integrity, ethics and responsibility: Governance structures and practices should be designed to promote an appropriate corporate culture of integrity, ethics, and corporate social responsibility.
7. Attention to information, agenda and strategy: Governance structures and practices should be designed to support the board in determining its own priorities, resultant agenda, and information needs and to assist the board in focusing on strategy (and associated risks).
8. Protection against board entrenchment: Governance structures and practices should encourage the board to refresh itself.
9. Shareholder input in director selection: Governance structures and practices should be designed to encourage meaningful shareholder involvement in the selection of directors.
10. Shareholder communications: Governance structures and practices should be designed to encourage communication with shareholders.
For a PDF of the NACD document, click here.