New york stock exchange listing rules corporate governance

New york stock exchange listing rules corporate governance

Author: berg01 Date of post: 30.05.2017

Companies listed on the Exchange must comply with certain standards regarding corporate governance as codified in this Section A. Consistent with the NYSE's traditional approach, as well as the requirements of the Sarbanes-Oxley Act of , certain provisions of Section A are applicable to some listed companies but not to others. Section A applies in full to all companies listing common equity securities, with the following exceptions:. Controlled companies must comply with the remaining provisions of Section A.

A controlled company that chooses to take advantage of any or all of these exemptions must comply with the disclosure requirements set forth in Instruction 1 to Item a of Regulation S-K. Due to their unique attributes, limited partnerships and companies in bankruptcy proceedings are not required to comply with the requirements of Sections A. However, all limited partnerships at the general partner level and companies in bankruptcy proceedings must comply with the remaining provisions of Section A.

The Exchange considers the significantly expanded standards and requirements provided for in Section A to be unnecessary for closed-end and open-end management investment companies that are registered under the Investment Company Act of , given the pervasive federal regulation applicable to them. However, closed-end funds must comply with the requirements of Sections A. A closed end fund is not required to comply with the director independence requirements of Section A.

A closed end fund is also not required to comply with the Disclosure Requirements in Section A. In addition, a closed-end fund is not required to make the audit committee charter required by Section A. Business development companies, which are a type of closed-end management investment company defined in Section 2 a 48 of the Investment Company Act of that are not registered under that act, are required to comply with all of the provisions of Section A applicable to domestic issuers other than Section A.

For purposes of Sections A. As required by Rule 10A-3 under the Exchange Act, open-end funds which can be listed as Investment Company Units, more commonly known as Exchange Traded Funds or ETFs are required to comply with the requirements of Sections A.

Rule 10A-3 b 3 ii under the Exchange Act requires that each audit committee must establish procedures for the confidential, anonymous submission by employees of the listed issuer of concerns regarding questionable accounting or auditing matters.

In view of the external management structure often employed by closed-end and open-end funds, the Exchange also requires the audit committees of such companies to establish such procedures for the confidential, anonymous submission by employees of the investment adviser, administrator, principal underwriter, or any other provider of accounting related services for the management company, as well as employees of the management company.

This responsibility must be addressed in the audit committee charter. Except as otherwise required by Rule 10A-3 under the Exchange Act for example, with respect to open-end funds , Section A does not apply to passive business organizations in the form of trusts such as royalty trusts or to derivatives and special purpose securities such as those described in Sections To the extent that Rule 10A-3 applies to a passive business organization, listed derivative or special purpose security, such entities are required to comply with Sections A.

Listed companies that are foreign private issuers as such term is defined in Rule 3b-4 under the Exchange Act are permitted to follow home country practice in lieu of the provisions of this Section A, except that such companies are required to comply with the requirements of Sections A.

Listed companies that satisfy the definition of smaller reporting company in Exchange Act Rule 12b-2 are not required to comply with Section A.

However, smaller reporting companies must comply with all applicable requirements under Section A. Section A does not generally apply to companies listing only preferred or debt securities on the Exchange. To the extent required by Rule 10A-3 under the Exchange Act, all companies listing only preferred or debt securities including securities listed under Sections Listed companies will have until the earlier of their first annual meeting after January 15, , or October 31, , to comply with the new director independence standards with respect to compensation committees contained in Section A.

Companies listing on the NYSE are required to comply with all applicable requirements of Section A as of date that the company's securities first trade on the NYSE the "listing date" unless otherwise provided below. A company will be considered to be listing in conjunction with an initial public offering as follows:. A company listing in conjunction with its initial public offering is required to comply as follows:. If it was required to file periodic reports with the SEC prior to listing, it is precluded from including non-independent directors on its audit committee during the phase-in period.

If the other exchange had a substantially similar requirement and the company was afforded a transition period that had not expired, the company will have the same transition period as would have been available to it on the other exchange. To the extent a controlled company ceases to qualify as such, it is required to comply with the Section A domestic company requirements as follows:.

To the extent a foreign private issuer ceases to qualify as such under SEC rules so that it is required to file on domestic forms with the SEC , such company is required to comply with the Section A domestic company requirements as follows:.

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Under SEC Rule The compensation committee of a company that has ceased to be a smaller reporting company shall be required to comply with Section A. If a listed company fails to comply with the compensation committee composition requirements because a member of the compensation committee ceases to be independent for reasons outside the member's reasonable control, that person, with prompt notice to the Exchange and only so long as a majority of the members of the compensation committee continue to be independent, may remain a member of the compensation committee until the earlier of the next annual shareholders' meeting of the listed company or one year from the occurrence of the event that caused the member to be no longer independent.

If a listed company makes a required Section A disclosure in its annual proxy statement, or if the company does not file an annual proxy statement, in its annual report filed with the SEC, it may incorporate such disclosure by reference from another document that is filed with the SEC to the extent permitted by applicable SEC rules.

If a listed company is not a company required to file a Form K, then any provision in this Section A permitting a company to make a required disclosure in its annual report on Form K filed with the SEC shall be interpreted to mean the annual periodic disclosure form that the listed company does file with the SEC. For example, for a closed-end management investment company, the appropriate form would be the annual Form N-CSR. November 25, NYSE ; January 11, NYSE ; August 22, NYSE Effective boards of directors exercise independent judgment in carrying out their responsibilities.

Requiring a majority of independent directors will increase the quality of board oversight and lessen the possibility of damaging conflicts of interest. A the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the listed company to such director; and. B whether such director is affiliated with the listed company, a subsidiary of the listed company or an affiliate of a subsidiary of the listed company. It is not possible to anticipate, or explicitly to provide for, all circumstances that might signal potential conflicts of interest, or that might bear on the materiality of a director's relationship to a listed company references to "listed company" would include any parent or subsidiary in a consolidated group with the listed company.

Accordingly, it is best that boards making "independence" determinations broadly consider all relevant facts and circumstances. In particular, when assessing the materiality of a director's relationship with the listed company, the board should consider the issue not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation.

Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others. However, as the concern is independence from management, the Exchange does not view ownership of even a significant amount of stock, by itself, as a bar to an independence finding. When considering the sources of a director's compensation in determining his independence for purposes of compensation committee service, the board should consider whether the director receives compensation from any person or entity that would impair his ability to make independent judgments about the listed company's executive compensation.

Similarly, when considering any affiliate relationship a director has with the company, a subsidiary of the company, or an affiliate of a subsidiary of the company, in determining his independence for purposes of compensation committee service, the board should consider whether the affiliate relationship places the director under the direct or indirect control of the listed company or its senior management, or creates a direct relationship between the director and members of senior management, in each case of a nature that would impair his ability to make independent judgments about the listed company's executive compensation.

The listed company must comply with the disclosure requirements set forth in Item a of Regulation S-K.

Employment as an interim Chairman or CEO or other executive officer shall not disqualify a director from being considered independent following that employment.

Compensation received by a director for former service as an interim Chairman or CEO or other executive officer need not be considered in determining independence under this test. Compensation received by an immediate family member for service as an employee of the listed company other than an executive officer need not be considered in determining independence under this test.

In applying the test in Section A. The look-back provision for this test applies solely to the financial relationship between the listed company and the director or immediate family member's current employer; a listed company need not consider former employment of the director or immediate family member.

Contributions to tax exempt organizations shall not be considered payments for purposes of Section A. If this disclosure is made on or through the listed company's website, the listed company must disclose that fact in its annual proxy statement or annual report, as applicable, and provide the website address. Listed company boards are reminded of their obligations to consider the materiality of any such relationship in accordance with Section A.

General Commentary to Section A. An "immediate family member" includes a person's spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone other than domestic employees who shares such person's home. When applying the look-back provisions in Section A. In addition, references to the "listed company" or "company" include any parent or subsidiary in a consolidated group with the listed company or such other company as is relevant to any determination under the independent standards set forth in this Section A.

To empower non-management directors to serve as a more effective check on management, the non-management directors of each listed company must meet at regularly scheduled executive sessions without management.

To promote open discussion among the non-management directors, companies must schedule regular executive sessions in which those directors meet without management participation. Regular scheduling of such meetings is important not only to foster better communication among non-management directors, but also to prevent any negative inference from attaching to the calling of executive sessions.

A non-management director must preside over each executive session, although the same director is not required to preside at all executive sessions.

While this Section A. An independent director must preside over each executive session of the independent directors, although the same director is not required to preside at all executive sessions of the independent directors. If a listed company chooses to hold regular meetings of all non-management directors, such listed company should hold an executive session including only independent directors at least once a year. If one director is chosen to preside at all of these executive sessions, his or her name must be disclosed either on or through the listed company's website or in its annual proxy statement or, if the listed company does not file an annual proxy statement, in its annual report on Form K filed with the SEC.

Alternatively, if the same individual is not the presiding director at every meeting, a listed company must disclose the procedure by which a presiding director is selected for each executive session. For example, a listed company may wish to rotate the presiding position among the chairs of board committees. In order that all interested parties not just shareholders may be able to make their concerns known to the non-management or independent directors, a listed company must also disclose a method for such parties to communicate directly with the presiding director or with those directors as a group either on or through the listed company's website or in its annual proxy statement or, if the listed company does not file an annual proxy statement, in its annual report on Form K filed with the SEC.

Companies may, if they wish, utilize for this purpose the same procedures they have established to comply with the requirement of Rule 10A-3 b 3 under the Exchange Act regarding complaints to the audit committee, as applied to listed companies through Section A.

New director and board committee nominations are among a board's most important functions. The committee is also responsible for taking a leadership role in shaping the corporate governance of a corporation. If a listed company is legally required by contract or otherwise to provide third parties with the ability to nominate directors for example, preferred stock rights to elect directors upon a dividend default, shareholder agreements, and management agreements , the selection and nomination of such directors need not be subject to the nominating committee process.

Any such committee must have a committee charter. Compensation committee members must satisfy the additional independence requirements specific to compensation committee membership set forth in Section A.

A review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO's performance in light of those goals and objectives, and, either as a committee or together with the other independent directors as directed by the board , determine and approve the CEO's compensation level based on this evaluation;.

B make recommendations to the board with respect to non-CEO executive officer compensation, and incentive-compensation and equity-based plans that are subject to board approval; and. In determining the long-term incentive component of CEO compensation, the committee should consider the listed company's performance and relative shareholder return, the value of similar incentive awards to CEOs at comparable companies, and the awards given to the listed company's CEO in past years.

To avoid confusion, note that the compensation committee is not precluded from approving awards with or without ratification of the board as may be required to comply with applicable tax laws i.

Note also that nothing in Section A.

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The compensation committee charter should also address the following items: Boards may allocate the responsibilities of the compensation committee to committees of their own denomination, provided that the committees are composed entirely of independent directors.

Nothing in this provision should be construed as precluding discussion of CEO compensation with the board generally, as it is not the intent of this standard to impair communication among members of the board. A listed company must make its compensation committee charter available on or through its website. If any function of the compensation committee has been delegated to another committee, the charter of that committee must also be made available on or through the listed company's website.

A listed company must disclose in its annual proxy statement or, if it does not file an annual proxy statement, in its annual report on Form K filed with the SEC that its compensation committee charter is available on or through its website and provide the website address. A The provision of other services to the listed company by the person that employs the compensation consultant, legal counsel or other adviser;.

B The amount of fees received from the listed company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser;.

C The policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest;. D Any business or personal relationship of the compensation consultant, legal counsel or other adviser with a member of the compensation committee;.

E Any stock of the listed company owned by the compensation consultant, legal counsel or other adviser; and. F Any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer of the listed company. Nothing in this Section A.

A to require the compensation committee to implement or act consistently with the advice or recommendations of the compensation consultant, independent legal counsel or other adviser to the compensation committee; or B to affect the ability or obligation of the compensation committee to exercise its own judgment in fulfillment of the duties of the compensation committee. The compensation committee is required to conduct the independence assessment outlined in Section A.

The compensation committee may select or receive advice from any compensation adviser they prefer including ones that are not independent, after considering the six independence factors outlined in Section A. Listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act. The Exchange will apply the requirements of Rule 10A-3 in a manner consistent with the guidance provided by the Securities and Exchange Commission in SEC Release No.

Without limiting the generality of the foregoing, the Exchange will provide companies the opportunity to cure defects provided in Rule 10A-3 a 3 under the Exchange Act. Please note that Rule 10A-3 d 1 and 2 require listed companies to disclose reliance on certain exceptions from Rule 10A-3 and to disclose an assessment of whether, and if so, how, such reliance would materially adversely affect the ability of the audit committee to act independently and to satisfy the other requirements of Rule 10A All audit committee members must satisfy the requirements for independence set out in Section A.

Each member of the audit committee must be financially literate, as such qualification is interpreted by the listed company's board in its business judgment, or must become financially literate within a reasonable period of time after his or her appointment to the audit committee. In addition, at least one member of the audit committee must have accounting or related financial management expertise, as the listed company's board interprets such qualification in its business judgment.

While the Exchange does not require that a listed company's audit committee include a person who satisfies the definition of audit committee financial expert set out in Item d 5 ii of Regulation S-K, a board may presume that such a person has accounting or related financial management expertise. Because of the audit committee's demanding role and responsibilities, and the time commitment attendant to committee membership, each prospective audit committee member should evaluate carefully the existing demands on his or her time before accepting this important assignment.

If an audit committee member simultaneously serves on the audit committees of more than three public companies, the board must determine that such simultaneous service would not impair the ability of such member to effectively serve on the listed company's audit committee and must disclose such determination either on or through the listed company's website or in its annual proxy statement or, if the listed company does not file an annual proxy statement, in its annual report on Form K filed with the SEC.

A assist board oversight of 1 the integrity of the listed company's financial statements, 2 the listed company's compliance with legal and regulatory requirements, 3 the independent auditor's qualifications and independence, and 4 the performance of the listed company's internal audit function and independent auditors if the listed company does not yet have an internal audit function because it is availing itself of a transition period pursuant to Section A.

A at least annually, obtain and review a report by the independent auditor describing: After reviewing the foregoing report and the independent auditor's work throughout the year, the audit committee will be in a position to evaluate the auditor's qualifications, performance and independence.

This evaluation should include the review and evaluation of the lead partner of the independent auditor. In making its evaluation, the audit committee should take into account the opinions of management and the listed company's internal auditors or other personnel responsible for the internal audit function.

In addition to assuring the regular rotation of the lead audit partner as required by law, the audit committee should further consider whether, in order to assure continuing auditor independence, there should be regular rotation of the audit firm itself.

The audit committee should present its conclusions with respect to the independent auditor to the full board. B meet to review and discuss the listed company's annual audited financial statements and quarterly financial statements with management and the independent auditor, including reviewing the listed company's specific disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations";.

Meetings may be telephonic if permitted under applicable corporate law; polling of audit committee members, however, is not permitted in lieu of meetings. With respect to closed-end funds, Section A. In addition, if a closed-end fund chooses to voluntarily include the section "Management's Discussion of Fund Performance" in its Form N-CSR, then the audit committee is required to meet to review and discuss it. C discuss the listed company's earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies;.

The audit committee's responsibility to discuss earnings releases, as well as financial information and earnings guidance, may be done generally i. The audit committee need not discuss in advance each earnings release or each instance in which a listed company may provide earnings guidance.

While it is the job of the CEO and senior management to assess and manage the listed company's exposure to risk, the audit committee must discuss guidelines and policies to govern the process by which this is handled. The audit committee should discuss the listed company's major financial risk exposures and the steps management has taken to monitor and control such exposures.

The audit committee is not required to be the sole body responsible for risk assessment and management, but, as stated above, the committee must discuss guidelines and policies to govern the process by which risk assessment and management is undertaken.

Many companies, particularly financial companies, manage and assess their risk through mechanisms other than the audit committee. The processes these companies have in place should be reviewed in a general manner by the audit committee, but they need not be replaced by the audit committee.

E meet separately, periodically, with management, with internal auditors or other personnel responsible for the internal audit function and with independent auditors;. To perform its oversight functions most effectively, the audit committee must have the benefit of separate sessions with management, the independent auditors and those responsible for the internal audit function.

As noted herein, all listed companies must have an internal audit function. These separate sessions may be more productive than joint sessions in surfacing issues warranting committee attention. If the listed company does not yet have an internal audit function because it is availing itself of a transition period pursuant to Section A. F review with the independent auditor any audit problems or difficulties and management's response;.

The audit committee must regularly review with the independent auditor any difficulties the auditor encountered in the course of the audit work, including any restrictions on the scope of the independent auditor's activities or on access to requested information, and any significant disagreements with management.

Among the items the audit committee may want to review with the auditor are: The review should also include discussion of the responsibilities, budget and staffing of the listed company's internal audit function.

G set clear hiring policies for employees or former employees of the independent auditors; and. Employees or former employees of the independent auditor are often valuable additions to corporate management. Such individuals' familiarity with the business, and personal rapport with the employees, may be attractive qualities when filling a key opening. However, the audit committee should set hiring policies taking into account the pressures that may exist for auditors consciously or subconsciously seeking a job with the listed company they audit.

The audit committee should review with the full board any issues that arise with respect to the quality or integrity of the listed company's financial statements, the listed company's compliance with legal or regulatory requirements, the performance and independence of the listed company's independent auditors, or the performance of the internal audit function. While the fundamental responsibility for the listed company's financial statements and disclosures rests with management and the independent auditor, the audit committee must review: A listed company must make its audit committee charter available on or through its website.

A closed-end fund is not required to comply with this website posting requirement. A listed company must disclose in its annual proxy statement or, if it does not file an annual proxy statement, in its annual report on Form K filed with the SEC that its audit committee charter is available on or through its website and provide the website address.

Listed companies must maintain an internal audit function to provide management and the audit committee with ongoing assessments of the listed company's risk management processes and system of internal control.

A listed company may choose to outsource this function to a third party service provider other than its independent auditor. To avoid any confusion, note that the audit committee functions specified in Section A. Shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, with limited exemptions explained below.

Equity-compensation plans can help align shareholder and management interests, and equity-based awards are often very important components of employee compensation. To provide checks and balances on the potential dilution resulting from the process of earmarking shares to be used for equity-based awards, the Exchange requires that all equity-compensation plans, and any material revisions to the terms of such plans, be subject to shareholder approval, with the limited exemptions explained below.

An "equity-compensation plan" is a plan or other arrangement that provides for the delivery of equity securities either newly issued or treasury shares of the listed company to any employee, director or other service provider as compensation for services. Even a compensatory grant of options or other equity securities that is not made under a plan is, nonetheless, an "equity-compensation plan" for these purposes. However, the following are not "equity-compensation plans" even if the brokerage and other costs of the plan are paid for by the listed company:.

A "material revision" of an equity-compensation plan includes but is not limited to , the following:. This type of plan regardless of its term is referred to below as a "formula plan. This type of plan is referred to below as a "discretionary plan. See the next section for details. Note that an amendment will not be considered a "material revision" if it curtails rather than expands the scope of the plan in question. A plan that does not contain a provision that specifically permits repricing of options will be considered for purposes of this listing standard as prohibiting repricing.

Accordingly any actual repricing of options will be considered a material revision of a plan even if the plan itself is not revised. This consideration will not apply to a repricing through an exchange offer that commenced before the date this listing standard became effective.

This listing standard does not require shareholder approval of employment inducement awards, certain grants, plans and amendments in the context of mergers and acquisitions, and certain specific types of plans, all as described below.

However, these exempt grants, plans and amendments may be made only with the approval of the listed company's independent compensation committee or the approval of a majority of the listed company's independent directors. Companies must also notify the Exchange in writing when they use one of these exemptions.

An employment inducement award is a grant of options or other equity-based compensation as a material inducement to a person or persons being hired by the listed company or any of its subsidiaries, or being rehired following a bona fide period of interruption of employment.

Inducement awards include grants to new employees in connection with a merger or acquisition. Promptly following a grant of any inducement award in reliance on this exemption, the listed company must disclose in a press release the material terms of the award, including the recipient s of the award and the number of shares involved. First, shareholder approval will not be required to convert, replace or adjust outstanding options or other equity-compensation awards to reflect the transaction.

Second, shares available under certain plans acquired in corporate acquisitions and mergers may be used for certain post-transaction grants without further shareholder approval. This exemption applies to situations where a party that is not a listed company following the transaction has shares available for grant under pre-existing plans that were previously approved by shareholders.

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A plan adopted in contemplation of the merger or acquisition transaction would not be considered "pre-existing" for purposes of this exemption. Shares available under such a pre-existing plan may be used for post-transaction grants of options and other awards with respect to equity of the entity that is the listed company after the transaction, either under the pre-existing plan or another plan, without further shareholder approval, so long as:.

These merger-related exemptions will not result in any increase in the aggregate potential dilution of the combined enterprise.

Further, mergers or acquisitions are not routine occurrences, and are not likely to be abused. Therefore, the Exchange considers both of these exemptions to be consistent with the fundamental policy involved in this standard. The following types of plans and material revisions thereto are exempt from the shareholder approval requirement:. Section a plans and Section plans are already regulated under the Internal Revenue Code and Treasury regulations.

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While Section a plans and parallel excess plans are not required to be approved by shareholders, U. GAAP requires that the shares issued under these plans be "expensed" i. An equity-compensation plan that provides non-U.

Except as provided below, a plan that was adopted before June 30, will not be subject to shareholder approval under this listing standard unless and until it is materially revised.

In the case of a discretionary plan as defined in "Material Revisions" above , whether or not previously approved by shareholders, additional grants may not be made without further shareholder approval. In applying this rule, if a plan can be separated into a discretionary plan portion and a portion that is not discretionary, the non-discretionary portion of the plan can continue to be used separately, under the appropriate transition rule.

For example, if a shareholder-approved plan permits both grants pursuant to a provision that makes available a specific number of shares, and grants pursuant to a provision authorizing the use of treasury shares without regard to the specific share limit, the former provision but not the latter may continue to be used after the transition period, under the general rule above. Similarly, in the case of a formula plan as defined in "Material Revisions" above that either 1 has not previously been approved by shareholders or 2 does not have a term of ten years or less, additional grants may not be made without further shareholder approval.

A shareholder-approved formula plan may continue to be used if it is amended to provide for a term of ten years or less from the date of its original adoption or, if later, the date of its most recent shareholder approval. Such an amendment would not itself be considered a "material revision" requiring shareholder approval. In addition, a formula plan may continue to be used, without shareholder approval, if the grants after June 30, are made only from the shares available immediately before the effective date, in other words, based on formulaic increases that occurred prior June 30, To the extent that a listed foreign private issuer ceases to qualify as such under SEC rules so that it is required to file on domestic forms with the SEC and as a result of such change in status becomes subject to Section A.

This transition period will end upon the later to occur of:. A shareholder-approved formula plan may continue to be used after the end of this transition period if it is amended to provide for a term of ten years or less from the date of its original adoption or, if later, the date of its most recent shareholder approval. Such an amendment may be made before or after the Determination Date, and would not itself be considered a "material revision" requiring shareholder approval.

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In addition, a formula plan may continue to be used, without shareholder approval, if the grants after the date that the listed company's status changed are made only from the shares available immediately before the Determination Date, in other words, based on formulaic increases that occurred prior to the Determination Date.

No single set of guidelines would be appropriate for every listed company, but certain key areas of universal importance include director qualifications and responsibilities, responsibilities of key board committees, and director compensation. These standards should, at minimum, reflect the independence requirements set forth in Sections A.

Companies may also address other substantive qualification requirements, including policies limiting the number of boards on which a director may sit, and director tenure, retirement and succession.

These responsibilities should clearly articulate what is expected from a director, including basic duties and responsibilities with respect to attendance at board meetings and advance review of meeting materials. Director compensation guidelines should include general principles for determining the form and amount of director compensation and for reviewing those principles, as appropriate. The board should be aware that questions as to directors' independence may be raised when directors' fees and emoluments exceed what is customary.

Similar concerns may be raised when the listed company makes substantial charitable contributions to organizations in which a director is affiliated, or enters into consulting contracts with or provides other indirect forms of compensation to a director. The board should critically evaluate each of these matters when determining the form and amount of director compensation, and the independence of a director.

Succession planning should include policies and principles for CEO selection and performance review, as well as policies regarding succession in the event of an emergency or the retirement of the CEO. The board should conduct a self-evaluation at least annually to determine whether it and its committees are functioning effectively. A listed company must make its corporate governance guidelines available on or through its website.

A listed company must disclose in its annual proxy statement or, if it does not file an annual proxy statement, in its annual report on Form K filed with the SEC that its corporate governance guidelines are available on or through its website and provide the website address. Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.

No code of business conduct and ethics can replace the thoughtful behavior of an ethical director, officer or employee. However, such a code can focus the board and management on areas of ethical risk, provide guidance to personnel to help them recognize and deal with ethical issues, provide mechanisms to report unethical conduct, and help to foster a culture of honesty and accountability.

Each code of business conduct and ethics must require that any waiver of the code for executive officers or directors may be made only by the board or a board committee.

Each code of business conduct and ethics must also contain compliance standards and procedures that will facilitate the effective operation of the code.

These standards should ensure the prompt and consistent action against violations of the code. Each listed company may determine its own policies, but all listed companies should address the most important topics, including the following:.

A "conflict of interest" occurs when an individual's private interest interferes in any way - or even appears to interfere - with the interests of the corporation as a whole. A conflict situation can arise when an employee, officer or director takes actions or has interests that may make it difficult to perform his or her company work objectively and effectively. Conflicts of interest also arise when an employee, officer or director, or a member of his or her family, receives improper personal benefits as a result of his or her position in the company.

Loans to, or guarantees of obligations of, such persons are of special concern.

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The listed company should have a policy prohibiting such conflicts of interest, and providing a means for employees, officers and directors to communicate potential conflicts to the listed company. Employees, officers and directors should be prohibited from a taking for themselves personally opportunities that are discovered through the use of corporate property, information or position; b using corporate property, information, or position for personal gain; and c competing with the company.

Employees, officers and directors owe a duty to the company to advance its legitimate interests when the opportunity to do so arises. Employees, officers and directors should maintain the confidentiality of information entrusted to them by the listed company or its customers, except when disclosure is authorized or legally mandated. Confidential information includes all non-public information that might be of use to competitors, or harmful to the company or its customers, if disclosed.

Each employee, officer and director should endeavor to deal fairly with the listed company's customers, suppliers, competitors and employees. None should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing practice.

Listed companies may write their codes in a manner that does not alter existing legal rights and obligations of companies and their employees, such as "at will" employment arrangements. All employees, officers and directors should protect the listed company's assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the listed company's profitability.

All listed company assets should be used for legitimate business purposes. The listed company should proactively promote compliance with laws, rules and regulations, including insider trading laws. Insider trading is both unethical and illegal, and should be dealt with decisively.

The listed company should proactively promote ethical behavior. The listed company should encourage employees to talk to supervisors, managers or other appropriate personnel when in doubt about the best course of action in a particular situation.

Additionally, employees should report violations of laws, rules, regulations or the code of business conduct to appropriate personnel. To encourage employees to report such violations, the listed company must ensure that employees know that the listed company will not allow retaliation for reports made in good faith.

A listed company must make its code of business conduct and ethics available on or through its website. A listed company must disclose in its annual proxy statement or, if it does not file an annual proxy statement, in its annual report on Form K filed with the SEC that its code of business conduct and ethics is available on or through its website and provide the website address.

To the extent that a listed company's board or a board committee determines to grant any waiver of the code of business conduct and ethics for an executive officer or director, the waiver must be disclosed to shareholders within four business days of such determination. Disclosure must be made by distributing a press release, providing website disclosure, or by filing a current report on Form 8-K with the SEC. Listed foreign private issuers must disclose any significant ways in which their corporate governance practices differ from those followed by domestic companies under NYSE listing standards.

Foreign private issuers must make their U. However, foreign private issuers are not required to present a detailed, item-by-item analysis of these differences. Such a disclosure would be long and unnecessarily complicated. Moreover, this requirement is not intended to suggest that one country's corporate governance practices are better or more effective than another.

The Exchange believes that U. The Exchange underscores that what is required is a brief, general summary of the significant differences, not a cumbersome analysis. A foreign private issuer that is required to file an annual report on Form F with the SEC must include the statement of significant differences in that annual report.

All other foreign private issuers may either i include the statement of significant differences in an annual report filed with the SEC or ii make the statement of significant differences available on or through the listed company's website. If the statement of significant differences is made available on or through the listed company's website, the listed company must disclose that fact in its annual report filed with the SEC and provide the website address.

The CEO's annual certification regarding the NYSE's corporate governance listing standards will focus the CEO and senior management on the listed company's compliance with the listing standards. In addition, each listed company must submit an interim Written Affirmation as and when required by the interim Written Affirmation form specified by the NYSE. Suspending trading in or delisting a listed company can be harmful to the very shareholders that the NYSE listing standards seek to protect; the NYSE must therefore use these measures sparingly and judiciously.

new york stock exchange listing rules corporate governance

For this reason it is appropriate for the NYSE to have the ability to apply a lesser sanction to deter companies from violating its corporate governance or other listing standards. Accordingly, the NYSE may issue a public reprimand letter to any listed company, regardless of type of security listed or country of incorporation that it determines has violated a NYSE listing standard.

For companies that repeatedly or flagrantly violate NYSE listing standards, suspension and delisting remain the ultimate penalties. For clarification, this lesser sanction is not intended for use in the case of companies that fall below the financial and other continued listing standards provided in Chapter 8 of the Listed Company Manual or that fail to comply with the audit committee standards set out in Section A.

The processes and procedures provided for in Chapter 8 govern the treatment of companies falling below those standards. Equity Listings Section A applies in full to all companies listing common equity securities, with the following exceptions: Limited Partnerships and Companies in Bankruptcy Due to their unique attributes, limited partnerships and companies in bankruptcy proceedings are not required to comply with the requirements of Sections A.

Closed-End and Open-End Funds The Exchange considers the significantly expanded standards and requirements provided for in Section A to be unnecessary for closed-end and open-end management investment companies that are registered under the Investment Company Act of , given the pervasive federal regulation applicable to them. Other Entities Except as otherwise required by Rule 10A-3 under the Exchange Act for example, with respect to open-end funds , Section A does not apply to passive business organizations in the form of trusts such as royalty trusts or to derivatives and special purpose securities such as those described in Sections Foreign Private Issuers Listed companies that are foreign private issuers as such term is defined in Rule 3b-4 under the Exchange Act are permitted to follow home country practice in lieu of the provisions of this Section A, except that such companies are required to comply with the requirements of Sections A.

Smaller Reporting Companies Listed companies that satisfy the definition of smaller reporting company in Exchange Act Rule 12b-2 are not required to comply with Section A. Preferred and Debt Listings Section A does not generally apply to companies listing only preferred or debt securities on the Exchange.

Transition Periods for Compensation Committee Requirements Listed companies will have until the earlier of their first annual meeting after January 15, , or October 31, , to comply with the new director independence standards with respect to compensation committees contained in Section A.

Compliance Dates Companies listing on the NYSE are required to comply with all applicable requirements of Section A as of date that the company's securities first trade on the NYSE the "listing date" unless otherwise provided below. A Company Listing in Conjunction with an Initial Public Offering A company will be considered to be listing in conjunction with an initial public offering as follows: A company listing in conjunction with its initial public offering is required to comply as follows: A Company Ceases to Qualify as a Controlled Company To the extent a controlled company ceases to qualify as such, it is required to comply with the Section A domestic company requirements as follows: A Company Ceases to Qualify as a Foreign Private Issuer To the extent a foreign private issuer ceases to qualify as such under SEC rules so that it is required to file on domestic forms with the SEC , such company is required to comply with the Section A domestic company requirements as follows: Cure Period for Compensation Committee Independence Non-Compliance If a listed company fails to comply with the compensation committee composition requirements because a member of the compensation committee ceases to be independent for reasons outside the member's reasonable control, that person, with prompt notice to the Exchange and only so long as a majority of the members of the compensation committee continue to be independent, may remain a member of the compensation committee until the earlier of the next annual shareholders' meeting of the listed company or one year from the occurrence of the event that caused the member to be no longer independent.

Disclosure Requirements If a listed company makes a required Section A disclosure in its annual proxy statement, or if the company does not file an annual proxy statement, in its annual report filed with the SEC, it may incorporate such disclosure by reference from another document that is filed with the SEC to the extent permitted by applicable SEC rules. November 25, NYSE A the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the listed company to such director; and B whether such director is affiliated with the listed company, a subsidiary of the listed company or an affiliate of a subsidiary of the listed company.

November 25, NYSE ; January 11, NYSE A review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO's performance in light of those goals and objectives, and, either as a committee or together with the other independent directors as directed by the board , determine and approve the CEO's compensation level based on this evaluation; B make recommendations to the board with respect to non-CEO executive officer compensation, and incentive-compensation and equity-based plans that are subject to board approval; and C prepare the disclosure required by Item e 5 of Regulation S-K; ii an annual performance evaluation of the compensation committee.

A The provision of other services to the listed company by the person that employs the compensation consultant, legal counsel or other adviser; B The amount of fees received from the listed company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser; C The policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest; D Any business or personal relationship of the compensation consultant, legal counsel or other adviser with a member of the compensation committee; E Any stock of the listed company owned by the compensation consultant, legal counsel or other adviser; and F Any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer of the listed company.

B meet to review and discuss the listed company's annual audited financial statements and quarterly financial statements with management and the independent auditor, including reviewing the listed company's specific disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations"; Commentary: C discuss the listed company's earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies; Commentary: D discuss policies with respect to risk assessment and risk management; Commentary: E meet separately, periodically, with management, with internal auditors or other personnel responsible for the internal audit function and with independent auditors; Commentary: F review with the independent auditor any audit problems or difficulties and management's response; Commentary: G set clear hiring policies for employees or former employees of the independent auditors; and Commentary: H report regularly to the board of directors.

November 25, NYSE ; August 22, NYSE Definition of Equity-Compensation Plan An "equity-compensation plan" is a plan or other arrangement that provides for the delivery of equity securities either newly issued or treasury shares of the listed company to any employee, director or other service provider as compensation for services.

However, the following are not "equity-compensation plans" even if the brokerage and other costs of the plan are paid for by the listed company: Material Revisions A "material revision" of an equity-compensation plan includes but is not limited to , the following: Repricings A plan that does not contain a provision that specifically permits repricing of options will be considered for purposes of this listing standard as prohibiting repricing.

Exemptions This listing standard does not require shareholder approval of employment inducement awards, certain grants, plans and amendments in the context of mergers and acquisitions, and certain specific types of plans, all as described below.

Employment Inducement Awards An employment inducement award is a grant of options or other equity-based compensation as a material inducement to a person or persons being hired by the listed company or any of its subsidiaries, or being rehired following a bona fide period of interruption of employment. Mergers and Acquisitions Two exemptions apply in the context of corporate acquisitions and mergers. Shares available under such a pre-existing plan may be used for post-transaction grants of options and other awards with respect to equity of the entity that is the listed company after the transaction, either under the pre-existing plan or another plan, without further shareholder approval, so long as: Qualified Plans, Parallel Excess Plans and Section Plans The following types of plans and material revisions thereto are exempt from the shareholder approval requirement: Transition Rules Initial Limited Transition Period Except as provided below, a plan that was adopted before June 30, will not be subject to shareholder approval under this listing standard unless and until it is materially revised.

Ongoing Transition Period for a Foreign Private Issuer Whose Status Changes To the extent that a listed foreign private issuer ceases to qualify as such under SEC rules so that it is required to file on domestic forms with the SEC and as a result of such change in status becomes subject to Section A.

NYSE Corporate Governance Rules

This transition period will end upon the later to occur of: The following subjects must be addressed in the corporate governance guidelines: Each listed company may determine its own policies, but all listed companies should address the most important topics, including the following:

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