ICI Comments on NYSE Corporate Governance and Disclosure Report, July 2002

Washington, DC, July 19, 2002 - The Institute recently submitted comment letters to the New York Stock Exchange (NYSE) regarding a report recommending changes in corporate governance and disclosure practices of NYSE-listed companies.

In the first letter, the Institute strongly supports the report's recommendation that shareholders approve all equity compensation plans. In a May statement, the Institute similarly urged the committee to consider stricter standards in this area in order to ensure that the interests of shareholders are protected in compensation matters.

The Institute also urges the NYSE to carefully consider several of the report's recommendations, including:

requiring audit committees to have the authority to retain and terminate the company's independent auditors, including the sole authority to approve all significant non-audit engagements with the independent auditors;
requiring listed companies to adopt and disclose their corporate governance guidelines; and
requiring listed foreign private issuers to disclose any significant ways in which their corporate governance practices differ from those followed by domestic companies under NYSE listing standards.

The Institute also expresses support for many of the report's recommendations to other institutions, such as the SEC, Congress, and the Financial Accounting Standards Board.

In a second letter, the Institute notes that several of the report's recommendations concerning investment companies are duplicative of existing federal securities law requirements. The Institute recommends a clarification that investment companies would not be subject to duplicative regulations on a number of issues, including:

the NYSE's definition of independent directors;
the report's recommendations with respect to nominating committees;
the report's recommendations with respect to compensation committees; and
the report's recommendations with respect to codes of business conduct and ethics.

The Institute makes a number of recommendations regarding audit committees, and also recommends that investment companies be provided the flexibility to disclose corporate governance guidelines in their proxy statements, annual reports, or websites.