Tài liệu Corporate Governance Best Practices - A Blueprint for the Post-Enron Era docx

Corporate Governance Best Practices A Blueprint for the Post-Enron Era SR-03-05 special report Members of the Advisory Board BP plc (UK) California Public Employees’ Retirement System (CalPERS) The Chubb Group of Insurance Companies Heidrick & Struggles Jones Day KPMG McKinsey & Company Merrill Lynch & Co., Inc. Pfizer Inc PricewaterhouseCoopers Teachers Insurance and Annuity Association— College Retirement Equities Fund (TIAA-CREF) Members of the Center Baxter International Inc. The Coca-Cola Company Computer Associates International, Inc. CSX Corporation Equiserve Fried, Frank, Harris, Shriver & Jacobson Georgeson Shareholder Communications Inc. Southern Company Services, Inc. Standard Life Investments Ltd. (UK) For further information regarding the Center, please contact Diane Insolia, Center Coordinator at 845 Third Ave., New York, NY 10022 Tel: 212 339 0392 Fax: 212 836 9711 e-mail: diane.insolia@conference-board.org The Conference Board creates and disseminates knowledge about management and the marketplace to help businesses strengthen their performance and better serve society. Working as a global, independent membership organization in the public interest, we conduct research, convene conferences, make forecasts, assess trends, publish information and analysis, and bring executives together to learn from one another. The Conference Board is a not-for-profit organization and holds 501 (c) (3) tax-exempt status in the United States. Disclaimer This report is intended for educational purposes only. Nothing contained in this report is to be considered as the rendering of legal or accounting advice. Readers are responsible for obtaining legal advice from their own legal counsel or accounting advisors. About the Global Corporate Governance Research Center The Conference Board’s Global Corporate Governance Research Center (Center) brings together corporations and institutional investors. The Center’s objective is to assist corporations to enhance their governance processes and thereby inspire confidence and facilitate capital formation in today’s globally competitive marketplace. Corporate Governance Best Practices A Blueprint for the Post-Enron Era by Carolyn Kay Brancato and Christian A. Plath 4 Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board Roundtable project sponsors THE CHUBB GROUP OF INSURANCE COMPANIES The member insurers of the Chubb Group of Insurance Companies form a multi-billion dollar organization providing property and casualty insurance for personal and commercial customers worldwide through 5,000 agents and brokers. Chubb’s global network includes branches and affiliates throughout North America, Europe, Latin America, Asia, and Australia. Chubb is a leading provider of directors and officers (D&O) liability insurance. PFIZER INC Pfizer Inc discovers, develops, manufactures, and markets leading prescription medicines for humans and animals and many of the world’s best-known consumer brands. Additional sponsors KPMG Audit Committee Institute PricewaterhouseCooopers LLP Sponsor/participants Arch Chemicals, Inc. Avon Products, Inc. Corn Products International, Inc. Footstar Inc. Oak Technology Spectrum Brands Wellmark, Inc. Contributors Baxter International, Inc. Gibson, Dunn & Crutcher LLP Heidrick & Struggles International, Inc. Potomac Electric Power Company Stanford Law School’s Executive Education Program TIAA-CREF The University of Delaware’s John L. Weinberg Center for Corporate Governance About this report Materials for this report were gathered at a series of nation-wide roundtables held during 2002 in New York; Washington, D.C. (hosted by Potomac Electric Power Company); Stanford, California (hosted by Heidrick & Struggles International, Inc., and the Stanford Law School’s Executive Education Program); Chicago (hosted by Baxter International Inc.), the University of Delaware (hosted by the John L. Weinberg Center for Corporate Governance); and at the offices of TIAA-CREF in New York. Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board 5 Corporate Governance Best Practices A Blueprint for the Post-Enron Era contents 7 A New Framework for Corporate Governance Corporate Governance Practices 10 Role of the Board 13 Corporate Governance Guidelines 14 Board’s Access to Information 16 Board’s Mix of Skills and Individual Director Qualifications 18 Board Independence 21 Board Leadership 23 Board Committee Structure and Size 24 Role of the Nominating/Corporate Governance Committee 26 Role of the Compensation Committee 29 Chief Governance Officer 30 Measuring Company Performance 32 Board and Director Performance Evaluation 34 Succession Planning and Leadership Development Audit Practices 36 Audit Committee Role and Responsibilities 38 Audit Committee Charter 40 Audit Committee Composition and Independence 43 Audit Committee Communication and Reporting 45 Oversight - Internal Audit 47 Oversight - External Audit Disclosure, Compliance and Ethics 51 Disclosure Practices 54 Internal Controls 57 Risk Assessment and Management 59 Director and Officer Liability and D&O Liability Insurance 63 Ethics Oversight Appendices 66 1 Legislation and Proposed Exchange Standards Comparison Chart 94 2 Hypothetical, Inc., Corporate Governance Principles 96 3 Independence Comparisons 99 4 Sample Corporate Governance Committee Charter (General Electric Corporation) 100 5 Sample Director Self-Assessment Worksheet 102 6 Sample Chief Executive Officer Evaluation Form 106 7 Sample Audit Committee Charter and Responsibilities Checklist (Microsoft Corporation) 110 8 KPMG Audit Committee Institute Basic Principles for Audit Committees 112 9 Excerpt from Internal Control: Guidance for Directors on the Combined Code Report by The Institute of Chartered Accountants in England and Wales About the authors Dr. Carolyn Kay Brancato is the Director of The Conference Board’s Global Corporate Governance Research Center and the Directors’ Institute. She also served as Director of The Conference Board’s Commission on Public Trust and Private Enterprise. She is the author of two books on corporate governance: Getting Listed on Wall Street and Institutional Investors and Corporate Governance (both published by Business One Irwin). Dr. Brancato has appeared as a guest speaker at major corporate governance programs in the United States, United Kingdom, France, Germany, Australia, Sweden, Brazil, Chile, India, Singapore, Hong Kong,Thailand, Indonesia, Japan, Malta, and Oman. Christian A. Plath is a Senior Corporate Governance Consultant with the Conference Board’s Global Corporate Governance Research Center. He was formerly the director of global corporate governance research at the Investor Responsibility Research Center (IRRC) and both writes and speaks widely on corporate governance issues. 6 Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board Aksys Ltd. APAC Customer Services, Inc. ArchChemicals Asian Venture Capital Journal Avon Products, Inc. Baxter International, Inc. The Boeing Company Brobeck, Phleger & Harrison Brunswick Corporation The Business Roundtable CDW Computer Centers, Inc. Chasm Group Corn Products International, Inc. CSX Corporation Davis & Harman LLP Deere & Company DelMonte Foods Company Diamond Cluster International, Inc. D.J. Hill & Associates, Inc. Embassy of France Equity Office Properties Trust Footstar, Inc. Freddie Mac Fordham University School of Law Friedman, Billings, Ramsey & Co., Inc. Gear Holdings, Inc. Genentech, Gibson, Dunn & Crutcher LLP Grubb & Ellis Co. H & Q Asia Pacific Halo Branded Solutions Heidrick & Struggles International, Inc. J.P. Morgan Partners Asia KPMG Marriot International, Inc. Masters Governance Consulting, LLC McKinsey & Co., Inc. Mercer Delta Consulting, LLC Merrill Lynch & Co., Inc. Methode Electronics, Inc. Monsanto Company Motorola Newell Rubbermaid Oak Technology, Inc. Olin Corporation Paul, Hasting, Janofsky & Walker LLP PeopleSoft, Inc. Pfizer Inc Potomac Electric Power Company PricewaterhouseCoopers LLP Real Networks Richards, Layton & Finger Sequoia Capital Singapore Institute of Management Skadden, Arps, Slate, Meagher & Flom LLP Spectrum Brands Taiwan Semiconductor Manufacturing Company, Ltd. TIAA-CREF Tribune Company United Stationers, Inc. U.S. Chamber of Commerce USG Corporation Weil, Gotshal & Manges, LLP Wellmark, Inc. Wink Communications WKB Advisory Services Woodhead Industries, Inc. Acknowledgments Participating companies and organizations A number of facilitators and subject matter discussants provided special input at the various sessions including: William K. Brown Jr., Catherine T. Dixon, John W. Edwards II, June Eichbaum, Anthony S. Galban, Randolf Hurst Hardock, R. William Ide III, Cary I. Klafter, Richard Koppes, Jon J. Masters, Nicholas G. Moore, Ronald Mueller, David Nygren, John F. Olson, Scott A. Reed, Laraine Rothenberg, Alan Rudnick, Richard Steinberg, Mark C.Terrell, John T. Thompson, William Torgerson, and Carol Ward. We are also grateful to Professor Charles E. Elson for inviting the following members of the Delaware courts to give us their perspectives: Vice Chancellor Stephen P. Lamb, Justice Myron T. Steele, Vice Chancellor Leo E. Strine, and Justice Joseph T. Walsh. Finally, we would like to thank Donovan Hervig and William K. Brown for providing draft materials for this report. Timothy Dennison editor Peter Drubin design Pam Seenaraine production Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board 7 A New Framework for Corporate Governance The Enron bankruptcy, accompanied by the WorldCom debacle and other corporate scandals, has caused a sea change in the attention given corporate governance and in how directors are viewed by the public, shareholders, employees, and the courts. Directors need to be sensitive and responsive to this new level of scrutiny and exposure. To address this new emphasis on corporate governance, The Conference Board’s Global Corporate Governance Research Center convened a major Director/Senior Executive Roundtable Project. Meetings were held throughout the year 2002 in New York; Washington, D.C.; Stanford, California; Chicago; and Wilmington, Delaware. More than 100 directors and executives took part in sharing their thoughts on evolving corporate governance “best prac- tices” in the post-Enron era. Parallel to these efforts, in June 2002, The Conference Board convened a Commission on Public Trust and Private Enterprise (Commission on Public Trust) 1 to address the circumstances which led to the corporate scandals that were widely reported during 2001-2002 and the subsequent decline of confidence in companies, their leaders and American capital markets. The Commission’s work articulates a series of principles and best practice suggestions in three major areas— executive compensation, corporate governance, and audit and accounting issues—as they relate to publicly held corporations. 2 This blueprint best practices report is the result of both the Roundtable Project and the Commission’s work and is intended to serve as a compendium of leading corpo- rate governance practices boards and management should consider within the context of each company’s unique circumstances. “Corporate governance” is defined in this report as a sys- tem of checks and balances between the board, manage- ment and investors to produce an efficiently functioning corporation, ideally geared to produce long-term value. There are several aspects to this governance system that should be noted at the outset: 1 Any governance system throughout the world is the product of a series of legal, regulatory, and best prac- tice elements. Each country’s regulatory and corporate law system will shape the specifics of its corporate governance. Corporate governance systems in the United States have been shaped by sets of pressures from: the Securities and Exchange Commission (SEC) with its regulatory oversight, stock exchanges with their listing requirements; the U.S. Congress enacting wide sweeping federal legislation; the courts, espe- cially those in Delaware that, with case law, set prece- dents; and institutional investors engaging in dialogue with corporations and which use certain proxy voting tactics such as the filing of shareowner proposals. 8 Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board 1 The 12-member Commission—co-chaired by Peter G. Peterson, Chairman of The Blackstone Group and Chairman of the Federal Reserve Bank of New York, and John W. Snow, former Chairman and CEO of CSX Corporation and former Chairman of The Business Roundtable— included prominent leaders from business, finance, public service, and academia. Although the Commission was sponsored and supported by The Conference Board, it enjoyed absolute independence and authority in its findings and recommendations, and was financially supported by the Pew Charitable Trusts. 2 The Commission issued its first set of findings and recommendations, Part 1: Executive Compensation, on September 17, 2002. Part 2: Corporate Governance and Part 3: Audit and Accounting were released on January 9, 2003. The full text of the Commission’s report and recom- mendations and a full list of the Commission’s members can be found at www.conference-board.org/knowledge/governCommission.cfm Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board 9 2 Global corporate governance research at The Conference Board concludes that corporate gover- nance models do not necessarily vary by country (e.g. there is no one “U.S.” model of corporate governance compared to an “Asian” model, or a “European” model). Governance systems are largely determined by the ownership structure of the company, regardless of its geographic location. Thus, wherever the corpo- ration is located, certain best practice elements, such as the number of “independent” directors, will vary depending on key ownership structures such as: • companies with widely held and dispersed shareholders; • companies which are closely held by blocks of investors; • companies which are family-owned businesses; and • newly privatized businesses where the government retains a residual investment. 3 Whatever the regulatory framework and the company’s overall governance structure, this project suggests there are a series of best practices which companies can and should consider to generate long term value for the corporation. It is fair to say that many boards have begun to embrace good governance, although the colle- gial format that is the basis for board interaction still tends to discourage open disagreement. Change there- fore tends to come either if there is an individual direc- tor/CEO/senior executive who is a corporate governance champion or if there is a crisis. Post-Enron, companies can no longer look upon corporate gover- nance as something thrust upon them from the outside. In every boardroom around the country, directors are asking themselves questions such as: • Is the board managed as effectively as the company is managed? • What processes do we need to put in place to make us more aware of “red flags” in company operations? • How do we fulfill our monitoring role and yet rely on management and external experts such as accountants, attorneys, and consultants? • How can corporate governance processes be used to help keep our company viable and restore public confidence in the capital markets? • How will instituting corporate governance best practices reduce corporate risk? The catastrophic corporate failures of Enron, WorldCom, and other companies have eroded confidence and shaken corporate America to the core. The result is that corpo- rate governance is more likely than ever to move from something done as a result of external pressures to some- thing boards can not afford to dismiss if they want to properly manage risk, provide internal efficiencies in running the corporation, and assure growth. Of course, the landmark enactment of the Sarbanes- Oxley Act and the listing requirement changes proposed by the major U.S. stock exchanges provide a rigorous framework for a whole host of federally mandated inter- nal controls and corporate governance reforms 3 (see Appendix 1). This document is intended to go beyond what is required by law and capture best practices 4 for internal corporate governance reform; in short, it is intended to be a blueprint for success. 3 The New York Stock Exchange (NYSE) and NASDAQ have both proposed changes to their listing standards and are expected to be updated to conform to final SEC regulation at which point they will be resubmitted to the SEC for final review, public comment, revision (if required), and final approval. 4 This document provides an overview of leading practices related to corporate governance and, although references are made to issued or proposed changes to regulations and listing standards, is not meant to provide a comprehensive review of these changes. The impact of the Sarbanes-Oxley Act and any final and proposed rules of the major U.S. stock exchanges and the SEC have been closely tracked by many law firms, accounting firms, consultants and other organizations. (See for example, KPMG LLP, Sarbanes-Oxley: A Closer Look, January 2003 – available at www.kpmg.com/aci – for discussion of some of the elements of the Sarbanes-Oxley Act impacting audit committees and the status of related issued or proposed SEC regulation.) Audit committees and senior management should consult with legal counsel and accounting advisors in the application of the Sarbanes-Oxley Act and any final and proposed rules of the major U.S. stock exchanges and the SEC. 10 Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board Corporate governance best practices are based on two basic legal requirements that shape the fiduciary role of the director: • the duty of care to be informed and exercise appropriate diligence in making decisions and to oversee the management of the corporation; and • the duty of loyalty to put the interests of the corporation before those of the individual director. In defining a system of board practices that leads to board effectiveness, it is clear that instituting governance best practices will provide the company with an internal effectiveness structure and a tool to manage corporate risk. The key to accomplishing this is to: make certain that the company’s board is managed as well as the com- pany itself is managed. Each board will be run differ- ently according to the company’s stage of development, ownership structure and size, and the mix of skills, and personalities of the individual directors. The “one size doesn’t fit all” rule clearly applies. On the other hand, there are basic legal requirements, as well as “manage- ment” skills that boards can and should adopt no matter their configuration. Corporate Governance Practices Role of the Board A strong and effective board should have a clear view of its role in relationship to management. The board’s duty is to focus on guidance and strategic oversight, while it is management’s duty to run the company’s business, with the goal of increasing shareholder value 5 for the long term. CEOs and management need to work with the board to establish the right kind of processes and communications to ensure that the company is running effectively and in accordance with the board’s basic fiduciary oversight requirements. The ultimate responsibility for directing the company, however, lies with the board, since most state corporation statutes generally provide that the business of the company shall be managed under the direction of the board. The specifics of the board’s role will vary with size, stage and strategy of the company, and talents and personalities of the CEO and the board. 5 U.S. corporate law dictates that companies be run for the benefit of shareholders, while European companies have more of a “stakeholder” focus. Most U S. observers note, however, that companies can not create shareholder value without taking stakeholders into consideration. A full discussion of the shareholder versus stakeholder debate is beyond the scope of this report. [...]... in the strategy Evaluation of past strategies including identification of successful strategies and an analysis of elements that were not successful 12 Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board Corporate Governance Guidelines The board should have a set of corporate guidelines in place to lay down the framework for the governance of the company and... interests of the company and its shareowners Typically, the CEO is a member of the board, but he or she is also a part of the management team the board oversees This dual role can present a potential for conflict, particularly in cases where the CEO attempts to dominate the management of the company and operations of the board Therefore, a crucial challenge for companies is striking the appropriate balance... Environmental compliance Other measures specific to each company Source: Carolyn Kay Brancato, Institutional Investors and Corporate Governance: Best Practices for Increasing Corporate Value (Chicago: Business One Irwin, 1998), p.45 30 Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board Such performance measurements may also be used as the basis for considering... Best Practices: A Blueprint for the Post-Enron Era The Conference Board 31 Board and Director Performance Evaluation All directors, management, and employees should be evaluated on an annual basis In this context, corporations should consider a three-tier director evaluation mechanism which includes a means to evaluate the performance of the board as a whole, the performance of each committee, and the. .. level, governance functions are coordinated among departments and are accorded sufficient importance within the company Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board 29 Measuring Company Performance The board must devise ways to effectively and continuously monitor the company’s progress against the stated goals Strategic performance measures that track both... that the individual’s service on the committee is in the best interests of the company and shareholders The company must disclose the use of such an exception in the next annual proxy statement, including the nature of the individual’s relationship to the company and the basis for the board’s determination 26 Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board The. .. have an entirely independent compensation committee that should take primary responsibility for ensuring that the compensation programs, and values transferred to management through cash pay, stock, and stock-based awards, are fair and appropriate to attract, retain, and motivate management, and are reasonable in view of company economics, and of the relevant practices of other, similar companies The. .. interests of the company and its shareholders The issuer is also required to disclose the use of such an exception in the next annual proxy statement, as well as the nature of the individual’s relationship to the company and the basis for the board’s determination Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board 25 Role of the Compensation Committee Companies should... or equivalent; or • the head of the nominating /governance committee 23 See Appendix 5 for a sample director self-evaluation worksheet 32 Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board 4 It will identify needed areas of improvement in areas such as: • the balance of power between the board and management; • focusing the board more on long-term strategy; •... of the board The board should conduct a self-evaluation at least annually to determine whether it, its committees, and individual directors are functioning effectively See page 1 8-1 9 and Appendix 1 for a summary of the NYSE’s independence requirements Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The Conference Board 13 Board’s Access to Information The effectiveness of the . Board 5 Corporate Governance Best Practices A Blueprint for the Post-Enron Era contents 7 A New Framework for Corporate Governance Corporate Governance Practices 10. Center for Corporate Governance) ; and at the offices of TIAA-CREF in New York. Corporate Governance Best Practices: A Blueprint for the Post-Enron Era The