On November 25, 2009, the Securities and Exchange Commission approved in their entirety the proposed amendments to the corporate governance requirements of the NYSE Listed Company Manual. These amendments will become effective January 1, 2010.

This Update provides key highlights of the amendments and offers practical advice.

Amendments Affect Listed Company Proxy Statements

Amendments Align With Item 407. The amendments align NYSE's corporate governance listing standards with Item 407 of Regulation S‑K, the disclosure rule related to corporate governance matters, such as director independence and board committees. Since the adoption of Item 407 in 2006, listed companies repeatedly asked NYSE if compliance with the disclosure requirements of Item 407 would also satisfy their obligations under NYSE's equivalent corporate governance disclosure requirements. In many instances, Item 407 either duplicated NYSE's requirements or required more detailed disclosures. To avoid duplication and confusion, the amendments eliminate each disclosure requirement currently included in NYSE listing standards that is also required by Item 407 and instead incorporate the related disclosure requirements of Item 407.

Director Independence Disclosures Need Only Conform to SEC Requirements. Following the date the NYSE amendments become effective, disclosures regarding the independence of non-management directors in a proxy statement for a listed company's annual shareholders meeting will be governed solely by the requirements of Item 407 of Regulation S-K. The amendments effectively eliminate NYSE's current references to the categorical standards for determining independence. However, NYSE has informally indicated that listed companies may continue to use categorical standards in determining director independence. If the listed company does not file a proxy statement, this disclosure must be included in the listed company's annual report.

Amendments Clarify Disclosure Requirement Regarding Method to Communicate Concerns to Non‑Management or Independent Directors. The amendments require a listed company to disclose in its annual proxy statement (or, if it does not file a proxy statement, in its annual report) a method for all interested parties, not just shareholders, to communicate any concerns directly to the presiding director or to the non-management or independent directors as a group. This amendment may prompt related revisions to a listed company's nominating and governance committee charter, corporate governance guidelines and investor relations websites.

Disclosure Requirement Regarding Service on Multiple Audit Committees Is Expanded. Under current NYSE requirements, if a listed company does not limit the number of audit committees on which its audit committee members can serve to three or less and a member of its audit committee serves on more than three public company audit committees, then the board must determine that such service will not impair the member's ability to serve effectively on its audit committee. The company must disclose this determination in its annual proxy statement (or, if it does not file a proxy statement, in its annual report). The amendments require this determination to be made and disclosed regardless of whether a listed company limits the number of audit committees on which its directors serve to three or less.

Listed Companies No Longer Need to Disclose Availability of Paper Copies of Governance Documents. The NYSE amendments eliminate the requirement that a listed company state in its annual proxy statement (or, if it does not file a proxy statement, in its annual report) that it will provide paper copies of its governance documents to any shareholder who requests it. The amendments retain the requirement that a listed company must disclose in its annual proxy statement (or, if it does not file a proxy statement, in its annual report) that its committee charters, corporate governance guidelines and code of business conduct and ethics are available on its website. The company must also provide the website address.

CEO Certification Disclosure Is No Longer Required in Annual Reports

The amendments no longer require a listed company to disclose in its annual report that its CEO filed the NYSE certification regarding corporate governance and that the company complied with SEC certification requirements regarding public disclosure.

Amendments Expand Permitted Use of Company Website for Disclosure Purposes

The amendments allow a listed company to make the following disclosures available on its corporate website, instead of in its proxy statement or annual report (as currently required):

  • information regarding contributions made by the company to a nonprofit organization of which an independent director of the company is an executive officer that exceed the greater of $1 million or 2% of the organization's revenues in any single fiscal year during the past three years;
  • the name of the director chosen to preside over executive sessions of non-management or independent directors, as applicable, or if the same director does not preside over every executive session, the procedure by which the presiding director is selected for each executive session;
  • how interested parties may communicate directly with the presiding director or non-management or independent directors as a group; and
  • the board's determination that an audit committee member's service on more than three public company audit committees does not impair his or her ability to serve effectively on the company's audit committee.

If a company opts to make these disclosures on its website, NYSE requires the listed company to disclose that fact and provide the listed company's website address in its annual proxy statement (or, if it does not file a proxy statement, in its annual report).

Practical Tips for Website Postings

Think Twice Before Relying Solely on Website Posting for Important Information. If information disclosed on a company's website is important, consider taking additional steps such as issuing a press release or filing a Current Report on Form 8-K. Filing the information as part of a Form 8-K will help keep any currently effective Form S-3 registration statements updated through incorporation by reference. Additionally, website posting alone may not constitute a sufficient method of public disclosure under Regulation FD unless it is reasonably designed to provide broad, non-exclusionary distribution of the information to the public. (The SEC has issued guidance (http://www.sec.gov/rules/interp/2008/34-58288.pdf) indicating that this depends on a variety of factors. See our February 8, 2008 update.) (http://www.perkinscoie.com/news/pubs_detail.aspx?publication=1791&op=updates )

Clearly Date All Materials Posted on Website. To avoid potential liability under the antifraud rules for information maintained on the website, clearly date all posted materials or statements and maintain historical statements or materials in a separate section of the website. Providing dates and separating historical information from current information will help clarify the date as of which the company intends the information to speak for purposes of the antifraud rules.

Amendments Clarify the Timing for Disclosure of Ethics Waivers

Under the current NYSE requirements, a company must "promptly" disclose any waiver of its codes of business conduct and ethics. The amendments clarify that the disclosure of a waiver should be made within four business days, which allows companies more time than the two to three days suggested by prior NYSE guidance. This timing is consistent with the SEC's requirement that specified ethics waivers be disclosed on a Form 8-K within four business days. NYSE permits this disclosure to be made by distributing a press release, providing website disclosure or by filing a Current Report on Form 8-K with the SEC.

Trap for the Unwary

NYSE disclosure requirements regarding waivers of a listed company's code of business conduct and ethics are broader in scope than the Form 8-K disclosure requirements.
Section 303A.10 of the NYSE Listed Company Manual requires disclosures of any code waiver for any executive officer or director. By contrast, Item 5.05 of Form 8-K requires disclosures of waivers relating only to specified subject matters when granted to a limited group of executive officers.

NYSE Clarifies Executive Session Requirements

In connection with these amendments, NYSE confirmed that a listed company may choose to satisfy NYSE's requirement for non-management directors to regularly meet in executive session by holding regular executive sessions of only its independent directors. NYSE noted in its proposal that this satisfies the original intention of the requirement. If a listed company regularly holds meetings of all non-management directors, it should also hold an executive session of only independent directors at least once a year.

NYSE Expands Notification Requirements Regarding Noncompliance

In the past, NYSE required the CEO of a listed company to notify NYSE in writing after an executive officer became aware of material noncompliance with NYSE corporate governance listing standards. The amendments heighten a listed company's disclosure obligations by requiring the CEO to notify NYSE in writing after an executive officer becomes aware of any noncompliance, even if it is not material.

Practical Tip

Controls and Procedures May Need to Be Adjusted to Address Expanded NYSE Notification Requirement. Consider reexamining internal controls and procedures to encourage rigorous compliance with NYSE's corporate governance listing standards and to ensure that any noncompliance will be identified and reported, even if it is not material. Consequences for noncompliance include NYSE appending a "below compliance" (BC) indicator to a ticker symbol, issuing a public reprimand letter and, in extreme cases, delisting.

Other Amendments

The amendments clarify the timing for certain interim written affirmations and the definition of "controlled companies." They also modify phase-in periods for newly listed companies and listed companies that no longer qualify as foreign private issuers. Additionally, the amendments move NYSE's requirement for listed companies to maintain a publicly accessible website from
Section 303A.14 to Section 307.

Additional Information

This Update is only intended to provide a summary of NYSE's corporate governance amendments. For more information on these amendments, see

  • the NYSE Rule Filing http://apps.nyse.com/commdata/pub19b4.nsf/docs/11C72242D46FD23B8525767F0053EF4B/$FILE/NYSE-2009-89.PDF ) (and Amendment No. 1 (http://apps.nyse.com/commdata/pub19b4.nsf/docs/A04CC33E4ECD6CCB8525767F0053EF9B/$FILE/NYSE-2009-89%20Partial%20Amendment.PDF ) to the Filing; and
  • the SEC release (http://www.sec.gov/rules/sro/nyse/2009/34-61067.pdf ) approving the amendments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.