The 2007 Director Stock Ownership Guidelines Report indicates that shareholder pressure for improved alignment of director-shareholder interests has led to increased use of director stock-ownership guidelines and holding requirements. The trend is likely to have continued in 2007 and into 2008, as those pressures have hardly abated. Better transparency in disclosure of corporate governance has generated a heap of new information on the prevalence and design of stock-ownership policies.

Among other key findings, the report reveals a 4.1-percent increase of the prevalence of ownership guidelines (as opposed to a set policy) at Fortune 250 companies, from 68.5 percent in 2005 to 72.6 percent in 2006. The presence of holding requirements at those companies also increased from 12.6 percent in 2005 to 14.9 percent in 2006.

Companies are also changing the way they measure ownership targets. In 2006, 59.4 percent of director stock ownership guidelines defined ownership targets as a multiple of annual retainer. In 2005, 62.0 percent of companies used this model. In both 2005 and

2006, the second most common ownership guideline design set ownership targets as a fixed number of shares. However, the prevalence of polices with targets set as a number of shares declined from 26.4 percent in 2005 to 25.7 percent in 2006.

Meanwhile, new disclosure rules set by the Securities and Exchange Commission have created new information surrounding key practices related to stock-ownership polices, the report finds. In 2006, information regarding non-compliance penalties, compliance status, compliance rewards, hardship provisions, and restrictions on hedging became available for the first time on a broad spectrum.

The Committee held a hearing in December to examineconsultants’ roles in advising boards on CEO pay, and whether or not thoseconsultants have conflicts of interests. During the hearing, the committee’s Democratic chairman, Henry A. Waxman, discussed a report – composed by his staff over theprevious seven months – when he explained that what he deems to be high paypackages for CEOs could derive from potential conflicts of interest on the partof compensation consultants that boards hire to advise them on pay, and also bythose same executives to consult on compensation inside the company and provideother services.

Waxman recently since sent a letter to Fortune 250comp committee chairs, explaining that corporate governance experts haverecommended that directors hire independent CEO pay consultants that canprovide objective advice regarding compensation. The letter asks the chairs forinformation from January 1, 2006 to the present regarding who has retainedcurrent consultants at the companies, and whether the company has disclosed informationto shareholders regarding other services provided by the consultant, if one hasdone so.