gv-comparison-of-governance-guidelines-united-states

COMPARISON OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE UNITED STATES s10 Holly J Gregory July 2005 © 2005 Corporate Governance refers to that blend of law, regulation, and appropriate voluntary private-sector practices which enables the corporation to attract financial and human capital, perform efficiently, and thereby perpetuate itself by generating long-term economic value for its shareholders, while respecting the interests of stakeholders and society as a whole The principal characteristics of effective corporate governance are: transparency (disclosure of relevant financial and operational information and internal processes of management oversight and control); protection and enforceability of the rights and prerogatives of all shareholders; and directors capable of independently approving the corporation’s strategy and major business plans and decisions, and of independently hiring management, monitoring management’s performance and integrity, and replacing management when necessary Ira M Millstein Senior Partner, Weil, Gotshal & Manges LLP and noted authority on corporate governance Holly J Gregory Partner Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153-0119 Tel: +1 212 310 8038 Fax: +1 212 310 8007 e-mail: holly.gregory@weil.com Ms Gregory specializes in corporate governance as a field of legal practice Weil, Gotshal & Manges LLP: Founded in 1931, Weil, Gotshal & Manges LLP has evolved into a leading international law firm, offering expertise in a wide range of diverse practice areas With an extraordinary talent base of over 1,200 attorneys in 20 offices around the world, Weil Gotshal serves a broad array of clients across multiple industries The Firm’s Corporate Governance Group is recognized as the preeminent counselors of corporate boards, management and institutional investors on the full range of governance issues including: board composition, structure and processes; executive and director compensation; director responsibilities, including in connection with mergers, spin-offs and other extraordinary transactions; internal and governmental investigations of alleged accounting or other corporate misconduct; and shareholder initiatives The Corporate Governance practice is well-integrated with other practice areas, providing the Firm with an unparalleled capacity to serve as counselors to companies and their boards across the entire range of situations: from healthy companies using governance to reduce risks of future business distress or to protect extraordinary transactions, to companies facing takeovers or enterprise-threatening litigation, to companies on the brink of financial distress The Business, Finance & Restructuring department is renowned for its ability to advise directors, investors, creditors, and companies on preventing and handling all forms of financial distress The Business & Securities Litigation department is highly regarded for its representation of a wide variety of companies and their directors in various forms of shareholder litigation, including in litigation related to takeovers The Firm’s Corporate department regularly represents clients in the full range of merger and acquisition, private equity, capital markets, bank and securitized financing, and other commercial transactions, including in many of the largest and innovative transactions completed each year Weil Gotshal attorneys have advised the World Bank, the Organisation for Economic Co-operation and Development (“OECD”), the European Commission and various stock exchanges and regulatory bodies on governance reform efforts and have been leaders in providing director training programs worldwide In addition, the Firm has played a leading role in the development of some of the world’s most influential corporate governance recommendations and guidelines, including: General Motors Board of Directors, CORPORATE GOVERNANCE GUIDE-LINES (1994, revised 2004); National Association of Corporate Directors (“NACD”), REPORT OF THE NACD BLUE RIBBON COMMISSION ON DIRECTOR PROFESSIONALISM (1996, reissued 2001); REPORT OF THE OECD BUSINESS SECTOR ADVISORY GROUP ON CORPORATE GOVERNANCE (“Millstein Report”) (1998); OECD PRINCIPLES OF CORPORATE GOVERNANCE (1999, revised 2004); International Corporate Governance Network (“ICGN”), STATEMENT ON GLOBAL CORPORATE GOVERNANCE PRINCIPLES (1999); REPORT OF THE BLUE RIBBON COMMITTEE ON IMPROVING THE EFFECTIVENESS OF CORPORATE AUDIT COMMITTEES (for the New York Stock Exchange (“NYSE”) and National Association of Securities Dealers (“NASD”) (1999); and European Association of Securities Dealers (“EASD”), CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS (2000); and the Firm completed a study of guidelines and codes for the European Commission entitled: COMPARATIVE STUDY OF CORPORATE GOVERNANCE CODES RELEVANT TO THE EUROPEAN UNION AND ITS MEMBER STATES (2002) For more information about the services we offer, visit http://www.weil.com or call Holly J Gregory at 212-310-8038 NEW YORK * AUSTIN * BOSTON * DALLAS * HOUSTON * MIAMI * PROVIDENCE * SILICON VALLEY * WASHINGTON, DC * WILMINGTON BRUSSELS * BUDAPEST * FRANKFURT * LONDON * MUNICH * PARIS * PRAGUE * SHANGHAI * SINGAPORE * WARSAW NY1:\1230423\09\QD#F09!.DOC\99990.0899 COMPARISON OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE: UNITED STATES The attached analysis compares suggestions for board structure and practice by influential members of the corporate, institutional investor and legal communities to the governance guidelines used by the General Motors Board of Directors Footnotes and Appendices reference relevant provisions of the Sarbanes-Oxley Act of 2002, New York Stock Exchange (“NYSE”) and Nasdaq Listing Rules, the 2004 ABA Corporate Director’s Guidebook, 2003-2004 survey data on actual board practices compiled by Korn/Ferry International and the National Association of Corporate Directors (“NACD”), and other information The “soft regulation” provided by voluntary guidelines and codes of best practice is in keeping with the regulatory philosophy that “one size does not fit all” when it comes to board practices By definition, guidelines and best practice codes describe standards to aspire to This does not mean that these guidelines and codes lack force and effect Even though compliance with substantive code provisions is wholly voluntary, reputational and market forces help focus the attention of companies and investors on governance issues and provide compliance pressures Thus, over time, best practices often become the norm and may even eventually become the basis for minimum standards as, for example, reflected in recent amendments to listing rules The structure and practice of corporate boards of directors has been a particular focus of institutional activism in recent years Coincident with their growing dominance as shareholders of publicly traded corporations, institutional investors have become active in corporate governance reform efforts in the past decade Increased sophistication about the use of shareholder power – and limits on their ability to sell the stock of underperforming portfolio companies – has focused key institutional investors on improving the accountability of corporate boards and managers In recent years, two of the most influential institutional investors, the California Public Employees’ Retirement System (“CalPERS” – the largest U.S public pension fund, with more than US$180 billion in assets under management) and the Teachers Insurance and Annuity Association – College Retirement Equities Fund (“TIAA-CREF” – a private pension fund that is the largest U.S pension fund, public or private, with assets of more than US$300 billion under management), have issued guideline documents that express their expectations concerning how the board of directors carries out its functions Also in recent years, the Council of Institutional Investors (“CII” – representing over 140 pension fund members with more than US$3 trillion in assets under management) and the American Federation of Labor – Congress of Industrial Organizations (“AFL-CIO” – representing over 13 million persons organized in labor unions) have issued guidelines relating to the corporate governance practices of the board In emphasizing the need for directors to exert independent influence over management while abjuring a “one-size-fits-all” approach, these documents all express philosophies similar to the board best practice suggestions issued in recent years by The Business Roundtable (“BRT”) and the NACD Nonetheless, some key differences remain on topics such as who qualifies as an “independent” director and whether, and to what extent, some independent board leadership is called for In several markets outside the U.S., similarly voluntary codes rely on a mandatory disclosure requirement to encourage compliance For example, in the United Kingdom and Canada, domestic companies listed on the London Stock Exchange and the Toronto Stock Exchange are required to disclose whether they comply with the specified code (the Combined Code in the U.K.; the Dey Report – as modified by the Saucier Report – in Canada) and to explain any deviations Linking codes to a disclosure requirement on a “comply or explain” basis is a means of encouraging adoption of specific corporate governance practices without mandating actual practices None of the U.S listing bodies have yet adopted a code of best practice, nor has any U.S code yet been linked to a disclosure requirement on a “comply or explain” basis However, the New York Stock Exchange listing rules mandate that listed companies adopt and publish corporate governance guidelines that address key issues This comparative analysis of recommended governance practices is designed to assist boards, directors and listed companies as they consider how to improve their own practices, including through the adoption and publication of corporate governance guidelines NY1:\1230423\09\QD#F09!.DOC\99990.0899 COMPARISON OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE: UNITED STATES TABLE OF CONTENTS* Page OVERVIEW The Corporate Objective & Mission of the Board of Directors 1a Board Job Description/Director Responsibilities** 1b The Role of Stakeholders Board Membership Criteria/Director Qualification Standards** Selecting & Inviting New Directors 3a Director Orientation & Continuing Education** Separation of Chairman & CEO “Presiding” or Lead Director Board Size Independent Board Majority Definition of “Independence” Conflicts of Interest & Ethics 10 Commitment, Limits on Other Board Service & Changes in Job Responsibility 11 Election Term, Term Limits & Mandatory Retirement 12 Director Compensation** & Stock Ownership 13 Executive Sessions of Outside Directors 14 Evaluating Board Performance** 15 Board Interaction/Communication with Shareholders, Press, Customers, etc 16 Board Access to Senior Management** Page Board Meetings & Agenda Board Information Flow, Materials & Presentations Number, Structure & Independence of Committees Assignment & Rotation of Committee Members Committee Meeting Frequency, Length & Agenda Formal Evaluation of the Chief Executive Officer Management Succession** & Development Executive Compensation & Stock Ownership Board Access to Independent Advisors** Content & Character of Disclosure Disclosure Regarding Compensation Disclosure Regarding Corporate Governance Accuracy of Disclosure, Internal Control Systems & Liability Auditor Independence Shareholder Voting Practices (Cumulative & Confidential Voting, Broker Non-Votes, One Share/One Vote) 32 Shareholder Voting Powers 33 Shareholder Meetings & Proxy Proposals 34 Anti-Takeover Devices APPENDIX I: Board of Director Composition and Function Requirements APPENDIX II: International Listing of Corporate Governance Guidelines & Codes of Best Practice 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 * This COMPARISON relies on the General Motors Corporate Governance Guidelines for organizational structure: headings in the Table of Contents generally follow the order of the GM Guidelines In the tables that follow, italic typeface is used to indicate the author’s comments All other typeface represents the quoted text of the Guidelines and Codes cited ** Under the NYSE Listing Rules as approved by the Securities & Exchange Commission on November 4, 2003, domestic listed companies are required to adopt and disclose corporate governance guidelines addressing: director responsibilities; director qualification standards; director orientation and continuing education; director compensation; annual board performance evaluation; director access to management; management succession; and board access, as necessary and appropriate, to independent advisors The double asterisk next to a heading indicates a topic that must be addressed in a domestic listed company’s guidelines NY1:\1230423\09\QD#F09!.DOC\99990.0899 i COMPARISON OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE: UNITED STATES Holly J Gregory* July 2005 GM Guidelines1 ALI Principles & Recommendations2 BRT Principles3 NACD Report4 Conference Board Recommendations5 OVERVIEW The General Motors (“GM”) Corporate Governance Guidelines, adopted by the GM Board in 1994 and regularly updated, are widely viewed as a seminal expression of a board’s voluntary efforts to improve its own governance The GM Guidelines have been widely discussed and emulated, and their influence has extended well beyond the U.S The American Law Institute (“ALI”) adopted its “Principles of Corporate Governance: Analysis and Recommendations” in May 1992 (published 1994, and regularly updated through issuance of supplements) The Business Roundtable (“BRT”) issued “Principles of Corporate Governance” in May 2002 The BRT is an association of CEOs of approximately 160 leading corporations The Report of the National Association of Corporate Directors (“NACD”) Commission on Director Professionalism, chaired by Ira M Millstein, discusses governance practices designed to promote a culture of “professionalism” for boards and The ALI Principles and The BRT Principles are intended to board members The NACD Report Recommendations are based on assist corporate management and (1996, reissued unchanged in 2001 and analysis of laws relating to the boards of directors in their efforts to again in 2005) is intended to be governance of corporations While implement effective corporate forward-looking and aspirational It they are, in large part, a restatement of governance and to serve as guideposts recognizes that board practices are widely accepted legal principles, they for public dialogue on evolving evolving and will continue to evolve also touch on governance best practice, governance standards The Report grants the premise that especially in Vol 1, Part III-A, The 2002 BRT Principles are an update each corporation has its unique “Recommendations of Corporate history and perspectives, and its own Practice Concerning the Board and the of the “Statement on Corporate Governance” (September 1997), which future to plan Fixed, rigid rules of Principal Oversight Committees.” updated “Corporate Governance and board governance are not, therefore, American Competitiveness” (March in order The Report suggests that 1990), which in turn updated “The qualified directors collectively make Role and Composition of the Board of their own rules for the governance of Directors of the Large Publicly Owned their respective boards, and it strongCorporation” (January 1978) Other ly urges that they so after BRT publications on corporate thoughtful and rigorous governance include “Executive deliberation Compensation/Share Ownership” In no sense is this a “one-size-fits(March 1992) and “Statement on all” approach; rather, it is a sophisCorporate Responsibility” (October ticated “do-it-yourself” process for 1981) board members seeking a culture of boardroom professionalism (Introduction by Ira M Millstein, pp 1-2) The Conference Board Commission on Public Trust and Private Enterprise recently issued “Findings and Recommendations, Part 1: Executive Compensation” (September 2002), and “Part 2: Corporate Governance/ Part 3: Audit and Accounting” (January 2003) The Conference Board formed a 12member Commission on Public Trust and Private Enterprise in 2002 to address recent corporate scandals and the perception of declining public trust in U.S companies, their leaders and the capital markets Commission members represented institutional investors, private corporations, government and the legal community * Holly J Gregory, a partner in the law firm of Weil, Gotshal & Manges LLP, practices in the Firm’s Corporate Governance Group Frederick W Philippi, a paralegal specialist, assisted in this comparative analysis See also Holly J Gregory, INTERNATIONAL COMPARISON OF SELECTED CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE: AMERICA · EUROPE · ASIA · AFRICA · AUSTRALIA (1998, revised 2005); and REGIONAL COMPARISONS: LATIN AMERICA (2003), ASIA (2002), EUROPEAN UNION (2002) and DEVELOPING & EMERGING MARKETS (2002), available at http://www.weil.com/wgm/pages/Controller.jsp? z=p&sz=CorpGov&db=wgm/WGMDoc.nsf&d=7fa691ef5e6d00ef85256d81004b74ba General Motors Board of Directors, Corporate Governance Guidelines (January 1994; most recently revised June 2004) The American Law Institute (“ALI”), Principles of Corporate Governance: Analysis and Recommendations, Vol (1994, with supplements) The Business Roundtable, Principles of Corporate Governance (May 2002) National Association of Corporate Directors (“NACD”), Report of the NACD Commission on Director Professionalism (November 1996, reissued 2001, 2005) The Conference Board Commission on Public Trust and Private Enterprise, Findings and Recommendations, Part 1: Executive Compensation (September 17, 2002); Findings and Recommendations, Part 2: Corporate Governance and Part 3: Audit and Accounting (January 9, 2003) NY1:\1230423\09\QD#F09!.DOC\99990.0899 CalPERS Principles/Guidelines6 CII Policies7 TIAA-CREF Policy Statement8 AFL-CIO Voting Guidelines9 OECD Principles/Millstein Report10 The American Federation of Labor and Congress of Industrial Organizations (“AFL-CIO”) represents approximately 10 million workers The AFL-CIO Proxy Voting Guidelines … have been developed to serve as a guide for Taft-Hartley and union benefit fund trustees in meeting their fiduciary duties as outlined in the Employee Retirement Income Security Act of 1974 (ERISA) and subsequent Department of Labor (DOL) policy statements… In addition, the Guidelines have been created to aid public employee trustees in the review and development of guidelines for their funds (Introduction) In April 1998, the Business Sector Advisory Group on Corporate Governance, chaired by Ira M Millstein, issued a report to the Organisation for Economic Cooperation and Development (“OECD”) entitled “Corporate Governance: Improving Competitiveness and Access to Capital in Global Markets” (“the Millstein Report”) It addresses the elements of a corporate governance framework relevant to the promotion of access to capital The OECD built upon this report through its “Principles of Corporate Governance” (1999, revised 2004), ratified by OECD Ministers NACD Report Conference Board Recommendations OVERVIEW California Public Employees’ Retirement System (“CalPERS”) is the largest public U.S pension fund with more than U.S $180 billion in assets under management Founded in 1985, the Council of Institutional Investors (“CII”) is an organization of large public, Taft-Hartley and corporate pension funds CII’s objectives are to encourage member funds, as major shareholders, to take an active CalPERS believes the criteria con- role in protecting plan assets and to tained in both the Principles and the help member funds increase the return Guidelines are important considera- on their investments as part of their tions for all companies within the fiduciary obligations Currently, CII U.S market However, CalPERS has more than 140 pension fund memdoes not expect nor seek that each bers, whose cumulative assets under company will adopt or embrace management exceed US$3 trillion every aspect of either the Principles or Guidelines CalPERS recognizes The CII Policies, adopted in March that some of these may not be ap1998 and regularly updated, bind propriate for every company As neither members nor corporations one shareowner, CalPERS believes They are designed to provide guidelines that the Principles represent the that CIl has found to be appropriate in foundation for accountability bemost situations tween a corporation’s management and its owners The Guidelines represent, in CalPERS’ view, additional features that may further advance this relationship of accountability (II) CalPERS has also embraced as its own a 10-point Working Kit of best practices adopted by the International Corporate Governance Network (“ICGN”) GM Guidelines ALI Principles & Recommendations Teachers Insurance and Annuity Association – College Retirement Equities Fund (“TIAA-CREF”), a private pension fund, is the largest U.S pension fund, public or private, with assets of more than US$300 billion under management TIAACREF encourages companies in which it invests to observe its corporate governance policies, as set forth in its “Policy Statement on Corporate Governance” (1997, revised January 2004) We place particular priority on three areas that were generally recognized as sources of significant and continuing corporate governance deficiencies: 1) the failure of boards of directors to play their required oversight role; 2) the failure of some professional advisors … to discharge their responsibilities properly; and 3) the failure of many investors, particularly institutional investors, to exercise effectively their rights and responsibilities or even to be heard on matters of corporate governance importantly affecting them Our new policy initiatives reinforce and supplement the reforms announced to date, and help to ensure that the spirit of these reforms is incorporated into practice (Introduction, p 2) BRT Principles The Corporate Objective & Mission of the Board of Directors The OECD Principles address: I Ensuring the Basis for an Effective Corporate Governance Framework; II The Rights of Shareholders and Key Ownership Functions; III Equitable Treatment of Shareholders; IV The Role of Stakeholders in Corporate Governance; V Disclosure and Transparency; and VI Responsibilities of the Board They are intended to serve as non-binding reference points for local governments and private sectors to adapt and build upon They are grounded on two propositions underpinning the Millstein Report: 1) no one country or existing system of corporate governance can serve as the model that dictates reform worldwide; and 2) access to capital is the primary driver for the integration of core corporate governance practices in the international arena 11 California Public Employees’ Retirement System (“CalPERS”), Corporate Governance Principles and Guidelines – United States (April 1998, updated April 2005) Council of Institutional Investors, Corporate Governance Policies (March 1998, most recently revised October 2004) Teachers Insurance and Annuity Association–College Retirement Equities Fund (“TIAA-CREF”), TIAA-CREF Policy Statement on Corporate Governance (October 1997, most recently revised January 2004) American Federation of Labor and Congress of Industrial Organizations (“AFL-CIO”), Exercising Authority, Restoring Accountability – AFL-CIO Proxy Voting Guidelines (1997, revised 2003) 10 Organization for Economic Cooperation and Development (“OECD”) Steering Group on Corporate Governance, Principles of Corporate Governance (April 1999, revised April 2004); Business Sector Advisory Group on Corporate Governance, Corporate Governance: Improving Competitiveness and Access to Capital in Global Markets: A Report to the OECD (“the Millstein Report”) (April 1998) NY1:\1230423\09\QD#F09!.DOC\99990.0899 The General Motors Board of Directors represents the owners’ interest in perpetuating a successful business, including optimizing longterm financial returns The Board is responsible for determining that the Corporation is managed in such a way to ensure this result This is an active, not a passive, responsibility The Board has the responsibility to ensure that in good times, as well as difficult ones, management is capably executing its responsibilities The Board’s responsibility is to regularly monitor the effectiveness of management policies and decisions, including the execution of its strategies In addition to fulfilling its obligations for increased stockholder value, the Board has responsibility to GM’s customers, employees, suppliers and to the communities where it operates – all of whom are essential to a successful business All of these responsibilities, however, are founded upon the successful perpetuation of the business (Introduction) [A] corporation should have as its objective the conduct of business activities with a view to enhancing corporate profit and shareholder gain (§ 2.01(a)) See § 3.01, Comment a (It is generally recognized that the board of directors is not expected to operate the business Even under statutes providing that the business and affairs shall be “managed” by the board of directors, it is recognized that actual operation is a function of management The responsibility of the board is limited to overseeing such operation….) The business of a corporation is managed under the direction of the corporation’s board The board delegates to the CEO, and through him or her to other senior management, the authority and responsibility for managing the everyday affairs of the corporation Directors monitor management on behalf of the corporation’s stockholders (pp 2-3) The board must exercise its fiduciary responsibilities in the best interests of the corporation and its shareholders (p 6) See Topic Heading 1a, below See Topic Heading 1a, below The objective of the corporation (and therefore of its management and board of directors) is to conduct its business activities so as to enhance corporate profit and shareholder gain In pursuing this corporate objective, the board’s role is to assume accountability for the success of the enterprise by taking responsibility for the management, in both failure and success This means selecting a successful corporate management team, overseeing corporate strategy and performance, and acting as a resource for management in matters of planning and policy (p 3) Each board of directors should establish a structure … that provides an appropriate balance between the powers of the CEO and those of the independent directors, enables it to carry out its oversight function, and gives the independent directors, in particular, the powers they require to perform their oversight roles (Part 2, Principle I) See Topic Heading 1a, below Among the most important missions of the board is ensuring that shareholder value is both enhanced through corporate performance and protected through adequate internal financial controls (p 10) See Topic Heading 1a, below See Topic Heading 1a, below 11 See American Bar Association, Committee on Corporate Laws, Section of Business Law, Corporate Director’s Guidebook (4th ed 2004) (hereinafter “2004 ABA Guidebook”) at (“As a general matter, a business corporation’s core objective in conducting its business activities is to create and increase shareholder value.”); id at (“Stated broadly, the principal responsibility of a corporate director is to promote the best interests of the corporation by providing general direction for the management of the corporation’s business and affairs.”); The Business Roundtable, Statement on Corporate Governance (September 1997) (hereinafter “1997 BRT Statement”) at (“[T]he principal objective of a business enterprise is to generate economic returns to its owners.”); The Business Roundtable, Statement on Corporate Governance and American Competitiveness (1990) (hereinafter “1990 BRT Statement”) at (“The boards of directors of American corporations play a central role in corporate governance Their principal responsibility is to exercise governance so as to ensure the long-term successful performance of their corporation.”) NY1:\1230423\09\QD#F09!.DOC\99990.0899 CalPERS Principles/Guidelines CII Policies TIAA-CREF Policy Statement AFL-CIO Voting Guidelines OECD Principles/Millstein Report The Corporate Objective & Mission of the Board of Directors Not covered directly, but see III.A (Independence is the cornerstone of accountability It is now widely recognized throughout the U.S that independent boards are essential to a sound governance structure… “A director’s greatest virtue is the independence which allows him or her to challenge management decisions and evaluate corporate performance from a completely free and objective perspective A director should not be beholden to management in any way.” (Quoting R.H Rock, Chairman, NACD, in DIRECTORS & BOARDS (Summer 1996).) Not covered directly, but see p (In general, the Council believes that corporate governance structures and practices should protect and enhance accountability to, and ensure equal financial treatment of, shareholders An action should not be taken if its purpose is to reduce accountability to shareholders.) See also p (The Council believes good governance practices should be followed by publicly traded companies, private companies and companies in the process of going public.) The primary responsibility of the board of directors is to foster the longterm success of the corporation, consistent with its fiduciary responsibility to shareholders and obligations to regulators To carry out this responsibility, the board must ensure that it is independent and accountable to shareholders, and must exert authority for the continuity of executive leadership with proper vision and values (p 3) Corporate directors have a fiduciary duty to shareholders and the corporaion they serve Shareholders elect corporate directors to hire, monitor, compensate and, if necessary, termiate senior management (IV.A) See Topic Heading 1a, below The primary purpose of the board is to protect shareholders’ interests by providing independent oversight of management, including the CEO (IV.A.7) See also Topic Heading 1a, below Directors bear ultimate responsibility for the success or failure of the company, and should be held accountable for actions taken that may not be in the company’s best interests (IV.A.1) See Topic Heading 1a, below The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders A Board members should act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the company and the shareholders B Where board decisions may affect different shareholder groups differently, the board should treat all shareholders fairly C The board should apply high ethical standards It should take into account the interests of stakeholders (Principle VI) See Principle I (The corporate governance framework should promote transparent and efficient markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities.) See Millstein Report, Perspective 21 ([C]orporations should disclose the extent to which they pursue projects and policies that diverge from the priary corporate objective of generating long-term economic profit so as to enhance shareholder value in the long term.) See also Topic Heading 1a, below NY1:\1230423\09\QD#F09!.DOC\99990.0899 GM Guidelines ALI Principles & Recommendations BRT Principles NACD Report 1a Board Job Description/Director Responsibilities [A]t a minimum, the independent directors will review CEO succession, performance and compensation; strategic issues for Board consideration; future Board agendas and the flow of information to directors; management progression and succession; and the Board’s corporate governance guidelines (Guideline 18) See Topic Heading 1, above The board of directors … should…: (1) Select, regularly evaluate, fix the compensation of, and, where appropriate, replace the principal senior executives; (2) Oversee the conduct of the corporation’s business to evaluate whether the business is being properly managed; (3) Review and, where appropriate, approve the corporation’s financial objectives and major corporate plans and actions; (4) Review and, where appropriate, approve major changes in … the appropriate auditing and accounting principles and practices…; (5) Perform such other functions as are prescribed by law, or assigned to the board under a standard of the corporation (§ 3.02(a)) A board of directors … has power to: (1) Initiate and adopt corporate plans, commitments, and actions; (2) Initiate and adopt changes in accounting principles and practices; (3) Provide advice and counsel to the principal senior executives; (4) Instruct any committee, principal senior executive, or other officer, and review actions of any committee, principal or other officer; (5) Make recommendations to shareholders; (6) Manage the business of the corporation; (7) Act as to all other corporate matters not requiring shareholder approval (§ 3.02(b)) See also Topic Heading 1, above The board of directors has the important role of overseeing management performance on behalf of stockholders Its primary duties are to select and oversee a well qualified and ethical CEO who, with senior management, runs the corporation on a daily basis, and to monitor management’s performance and adherence to corporate standards Effective corporate directors are diligent monitors, but not managers, of business operations (p 1) Directors should not represent the interests of particular constituencies (p 3) The board has responsibility for overseeing and understanding the corporation’s strategic plans from their inception through their development and execution by management (p 4) [T]he board reviews and approves specific corporate actions… The board and senior management should have a clear understanding of what level or types of decisions require specific board approval (p 6) See generally II The Roles of the Board of Directors and Management, pp 2-10, and III How the Board Performs Its Oversight Function, pp 10-30 See also Topic Heading 1, above Conference Board Recommendations 12 [E]ach board has the freedom – and, the Commission believes, the obligation – to define its role and duties in detail (p 3) [B]oard responsibilities include:  approving a corporate philosophy and mission  selecting, monitoring, evaluating, compensating, and – if necessary – replacing the CEO  reviewing and approving management’s strategic and business plans  reviewing and approving the corporation’s financial objectives, plans, and actions  reviewing and approving material transactions not in the ordinary course of business  monitoring corporate performance against the strategic and business plans  ensuring ethical behavior and compliance with laws  assessing its own effectiveness  performing such other functions as are prescribed by law (pp 3-4) Boards should periodically review board and CEO role descriptions to accommodate changes in corporate governance and company operations (p 6) See generally Chapter 2, How Boards Should Fulfill Their Responsibilities, pp 5-8 Among the core responsibilities of the board are: understanding and approving the corporation’s long-term, central strategies; understanding the issues, forces, and risks that define and drive the company’s business; and overseeing the performance of management A vigorous and diligent board of directors, a substantial majority of whom are independent, with an appropriate committee structure, is the key to fulfilling the board’s responsibilities and to a corporation’s effective governance (Part 2, Principle II) To discharge their responsibilities most effectively, directors should:  exercise objectivity and autonomy to make independent, informed decisions;  develop the knowledge and expertise to provide effective board oversight;  display the character, integrity, and will to assert their points of view, and demonstrate loyalty exclusively to the corporation and its shareowners;  devote the time necessary to fulfill the legal, regulatory and stock exchange requirements imposed upon them; and  Have the ability to retain … advisors and independent staff support (Part 2, Introduction at 10) See Topic Heading 1, above See also Topic Heading 1, above 12 Under the NYSE Listing Rules, domestic listed companies are required to adopt and disclose corporate governance guidelines that clearly articulate the responsibilities of directors Appendix I (Board of Director Composition and Function Requirements) at 16 See 2004 ABA Guidebook at (“[Under the Model Act,] all corporate powers shall be exercised by or under the authority of the board of directors of the corporation, and the business and affairs of the corporation shall be managed by or under the direction, and subject to the oversight, of its board of directors This language emphasizes the board’s responsibility to oversee the management of the corporation….”); 1990 BRT Statement at (“The board of directors has five primary functions: Select, regularly evaluate and, if necessary, replace the chief executive officer Determine management compensation Review succession planning Review and, where appropriate, approve the financial objectives, major strategies, and plans of the corporation Provide advice and counsel to top management Select and recommend to shareholders for election an appropriate slate of candidates for the board of directors, evaluate board processes and performance Review the adequacy of systems to comply with all applicable laws/regulations.”); 2003-2004 National Association of Corporate Directors (“NACD”) Public Company Governance Survey (hereinafter “2003-2004 NACD Survey”) at (among the top issues facing U.S companies today, survey respondents identified: CEO succession, corporate performance and valuation, corporate governance (accountability sysNY1:\1230423\09\QD#F09!.DOC\99990.0899 CalPERS Principles/Guidelines CII Policies TIAA-CREF Policy Statement AFL-CIO Voting Guidelines OECD Principles/Millstein Report 1a Board Job Description/Director Responsibilities Not covered directly, but see Topic Heading 1, above Boards should take actions recommended in shareholder proposals that receive a majority of votes cast for and against If shareholder approval is required for the action, the board should submit the proposal to a binding vote at the next shareholder meeting… Directors should respond to communications from shareholders and should seek shareholder views on important governance, management and performance matters All directors should attend the annual shareholders’ meeting and be available, when requested by the chair, to answer shareholder questions… All companies should establish a mechanism by which shareholders with non-trivial concerns could communicate directly with all directors, including independent directors (pp 2-3) [I]ndependence is critical to a properly functioning board (p 14) See p (All members of the compensation committee … should exercise due diligence and independent judgment in carrying out their committee responsibilities.) See also Topic Heading 1, above The board is singularly responsible for the selection and evaluation of the corporation’s chief executive officer and included in that evaluation is assurance as to the quality of senior management The board should also be responsible for the review and approval of the corporation’s longterm strategy, the assurance of the corporation’s financial integrity, and the development of equity and compensation policies that motivate management to achieve and sustain superior long-term performance The board should put in place structures and processes that enable it to carry out these responsibilities effectively Certain issues may be delegated appropriately to committees, including the audit, compensation and corporate governance/nominating committees, to develop recommendations to bring to the full board Nevertheless, the board maintains overall responsibility for the work of the committees and the longterm success of the corporation (p 3) The board should review the company’s strategic plan at least annually (p 7) [The board] should ensure that it is the focal point for accountability of the CEO and management of the company (p 8) See p 13 (Shareholders should have the right to expect that each director is acting in the interests of all shareholders and not the interest of a dominant shareholder or particular stakeholder.) See also Topic Heading 1, above Not covered directly, but see IV.A.1 (Directors bear ultimate responsibility for the success or failure of the company, and should be held accountable for actions taken that may not be in the company’s best long-term interests Such actions may include awarding excessive compensation to executives or themselves; approving corporate restructurings or downsizings that are not in the company’s best long-term interest; adopting anti-takeover provisions without shareholder approval; refusing to provide information to which the shareholders are entitled; or other actions that may not be in the company’s long-term best interests… The fiduciary should take into consideration the performance of the key committees (audit, compensation and nominating committees), particularly with regard to advancing and upholding the principles established in these Guidelines Factors to consider include specific actions of the committees (e.g., approving excessive executive compensation or failing to address auditor conflicts of interest) and the quality of committee disclosure.) See also IV.A.12 (Shareholders have introduced proposals asking for clarification on the role the board of directors, as representatives of the shareholders, play in developing business The fiduciary should support proposals asking for such additional disclosure.) See also Topic Heading 1, above The board should fulfill certain key functions, including: Reviewing and guiding corporate strategy, major plans of action, risk policy, annual budgets and business plans; setting performance objectives; monitoring implementation and corporate performance; and overseeing major capital expenditures, acquisitions and divestitures Monitoring the effectiveness of the company’s governance practices… Selecting, compensating, monitoring and, when necessary, replacing key executives and overseeing succession planning Aligning key executive and board remuneration with the longer term interests of the company and its shareholders Ensuring a formal and transparent board nomination and election process Monitoring and managing potential conflicts of interest of management, board members and shareholders… Ensuring the integrity of the corporation’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place… Overseeing the process of disclosure and communications (Principle VI.D) The board should be able to exercise objective independent judgment on corporate affairs (Principle VI.E) See Topic Heading 1, above (Footnote 12, continued) tems), and strategic planning); Korn/Ferry International, 31st Annual Board of Directors Study (2004) (hereinafter “2004 Korn/Ferry Study”) at 33 (“Independent, unbiased oversight representing the best interests of shareholders is possible only when a board meets respondents’ top criteria determining good governance: a board made up of a majority of outside directors (93 percent), conducting a formal review of the CEO (87 percent), and the need for a formal management succession committee (83 percent).”) NY1:\1230423\09\QD#F09!.DOC\99990.0899 APPENDIX II INTERNATIONAL LISTING OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE ARGENTINA  Report on Capital Market Transparency and Reform for Best Corporate Governance Practices (“Villegas Report”) (June 2001) Available upon request at vscaffino@nicholsonycano.com.ar AUSTRALIA  Chartered Secretaries Australia, Good Governance Guides (May 8, 2004) http://www.csaust.com/reference/index.cfm?part=7&subpart=21  Australian Stock Exchange Corporate Governance Council, Principles of Good Corporate Governance and Best Practice Recommendations (March 2003) http://www.asx.com.au/about/pdf/ASXRecommendations.pdf **  Investment & Financial Services Association (“IFSA”), formerly Australian Investment Managers Association (“AIMA”), Corporate Governance – A Guide for Fund Managers and Corporations (1995, revised December 2002) http://www.ecgi.org/codes/country_documents/australia/ifsa_december_2002.pdf *  The Audit Office of New South Wales, Performance Audit Report – Corporate Governance, Volume One: In Principle & Volume Two: In Practice (June 1997) http://www.audit.nsw.gov.au/perfaud-rep/Year-1997-1998/crpg1-97/crpg1-97.pdf (Vol 1) and http://www.audit.nsw.gov.au/perfaud-rep/Year-1997-1998/crpg197/crpg1-97.pdf (Vol 2)  Working Group representing Australian Institute of Company Directors, Australian Society of Certified Practicing Accountants, Business Council of Australia, Law Council of Australia, The Institute of Chartered Accountants in Australia & The Securities Institute of Australia, Corporate Practices and Conduct (“Bosch Report”) (3d ed., 1995) Available upon request at robertco@woodslane.com.au AUSTRIA  Österreichischen Arbeitskreises für Corporate Governance, Regierungsbeauftragter für den Kapitalmarkt, Austrian Code of Corporate Governance (September 2002) http://www.wienerboerse.at/corporate/pdf/CG_Code_engl1103final.pdf BANGLADESH  Bangladesh Enterprise Institute Taskforce on Corporate Governance, The Code of Corporate Governance for Bangladesh – Principles & Guidelines for Best Practices in the Private Sector, Financial Institutions, State-Owned Enterprises & Non-Governmental Organisations (March 2004) http://www.gcgf.org/library/codes/Bangladesh/Bangladesh_Codes_Corp_Gov_Mar2004.pdf BELGIUM  Corporate Governance Committee (“Lippens Committee”), The Belgian Code on Corporate Governance (December 9, 2004) http://www.ecgi.org/codes/code.php? code_id=154 *  Fondation des Administrateurs (“FDA”), The Directors’ Charter (January 2000) http://www.ecgi.org/codes/country_documents/belgium/fda_code_eng.pdf  Brussels Stock Exchange/Banking & Finance Commission, Corporate Governance for Belgian Listed Companies (a “Dual Code” combining the Cardon Report and the Banking & Finance Commission Recommendations) (December 1998) http://www.eccg.org/codes/country_documents/belgium/be_mergedcode.pdf  Federation of Belgian Companies (“VBO/FEB”), Corporate Governance – Recommendations (January 1998) http://www.ecgi.org/codes/country_documents/belgium/vbo_feb_en.pdf * Investor viewpoint ** Hybrid viewpoint (investors, academics and private business sector representatives) NY1:\1230423\09\QD#F09!.DOC\99990.0899 App-29 APPENDIX II INTERNATIONAL LISTING OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE BRAZIL Instituto Brasileiro de Governanỗa Corporativa (IBGC), Code of Best Practice of Corporate Governance (May 8, 1999, most recently revised March 30, 2004) http://www.ibgc.org.br/imagens/StConteudoArquivos/IBGC%20Code%203rd%20edition.pdf  Comissão de Valores Mobiliários (“CVM”) (Securities & Exchange Commission of Brazil), CVM Recommendations on Corporate Governance (June 2002) http://www.cvm.gov.br/ingl/mapa/redir.asp?submenu=/ingl/Public/submenu.asp&submain=/ingl/public/publ/governanca/recomen.doc CANADA  Canadian Coalition for Good Governance, Corporate Governance Guidelines for Building High Performance Boards (January 2004) http://www.ccgg.ca/web/website.nsf/web/CCGG_Guidelines/$FILE/CCGG_Guidelines_v1_Jan04.pdf *  Joint Committee on Corporate Governance, Beyond Compliance: Building a Governance Culture (“Saucier Report”) (November 2001) http://www.cica.ca/multimedia/Download_Library/Research_Guidance/Risk_Management_Governance/Governance_Eng_Nov26.pdf **  Institute of Corporate Directors & Toronto Stock Exchange, Report on Corporate Governance, 1999 – Five Years to the Dey (1999) http://www.otpp.com/web/website.nsf/web/Five_Years_To_The_Dey/$FILE/5years.pdf  Pension Investment Association of Canada (“PIAC”), Corporate Governance Standards (September 1993; 2001 update) http://www.piacweb.org/publications_governance.cfm?subpage=5, 2001 update http://www.piacweb.org/publications_governance.cfm?subpage=6 *  Toronto Stock Exchange Commission on Corporate Disclosure, Responsible Corporate Disclosure: A Search for Balance (March 1997) Available upon request at marketdata@tse.com  Toronto Stock Exchange Committee on Corporate Governance in Canada, “Where Were The Directors?”: Guidelines For Improved Corporate Governance in Canada (“Dey Report”) (December 1994) http://www.ecgi.org/codes/country_documents/canada/dey.pdf CHINA  China Securities Regulatory Commission (“CSRC”), Guidelines For Introducing Independent Directors to the Board of Directors of Listed Companies (August 16, 2001) http://www.csrc.gov.cn/en/jsp/detail.jsp?infoid=1061947864100&type=CMS.STD  CSRC and State Economic and Trade Commission, Code of Corporate Governance for Listed Companies in China (January 7, 2001) http://www.ecgi.org/codes/documents/code_en.pdf COLOMBIA  Confederación Colombiana de Cámaras de Comercio (“Confecámaras”) (Colombian Confederation of Chambers of Commerce), Corporate Governance Code (August 2002) http://www.confecamaras.org.co/cgcolombia/gobierno-corp/html/documents/CORPORATECOVERNANCECODE1.pdf CYPRUS  Cyprus Stock Exchange, Addendum of the Corporate Governance Code (November 2003) http://www.cse.com.cy/en/MarketData/Data/addendum of the cgc-Engl.doc  Cyprus Stock Exchange, Corporate Governance Code (September 2002) http://www.cse.com.cy/en/MarketData/Data/Corporate%20Governance%20official %20translation%20FINAL.doc * Investor viewpoint ** Hybrid viewpoint (investors, academics and private business sector representatives) NY1:\1230423\09\QD#F09!.DOC\99990.0899 App-30 APPENDIX II INTERNATIONAL LISTING OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF CZECH REPUBLIC  Czech Securities Commission, Corporate Governance Code Based on the OECD Principles (February 2001, revised June 2004) BEST PRACTICE http://www.sec.cz/download/Brochures/CG_2004_web_AJ.pdf  Czech Institute of Directors, Corporate Governance Code of Practice (February 2001) (Now Annex to Czech Securities Commission Code, above) DENMARK  The Nørby Commission, Recommendations for Good Corporate Governance in Denmark (December 6, 2001) http://www.corporategovernance.dk/db/files/filebc21b1d566c.pdf  Danish Shareholders Association, Guidelines on Good Management of a Listed Company (Corporate Governance) (draft, February 29, 2000) http://www.ecgi.org/codes/country_documents/denmark/corporate_daf_e.pdf * FINLAND  HEX Integrated Markets, the Central Chamber of Commerce of Finland & the Confederation of Finnish Industry and Employers, Corporate Governance Recommendations for Listed Companies (December 2003) http://www.hex.com/files/4TWk1Gxrx/linkkfile/CG_Suositus_A4_eng.pdf  Ministry of Trade and Industry, Guidelines for Handling Corporate Governance Issues in State-Owned Companies and Associated Companies (November 7, 2000)  Central Chamber of Commerce/Confederation of Finnish Industry and Employers, Corporate Governance Code for Public Limited Companies (February 10, 1997) FRANCE Association Franỗaise de la Gestion Financiốre Association des Sociộtộs et Fonds Franỗais dInvestissement (AFG-ASFFI), Recommendations sur le Gouvernement d’Entreprise (“Hellebuyck Commission Recommendations”) (June 9, 1998, revised March 4, 2004) http://www.afg-asffi.com/upload/3/Fichier65.pdf English translation available of earlier version only: http://www.ecgi.org/codes/country_documents/denmark/corporate_daf_e.pdf (June 9, 1998, amended October 2001) *  Working group chaired by Daniel Bouton, Promoting Better Corporate Governance in Listed Companies (“Bouton Report”) (September 23, 2002) Available upon request at bllserve@abanet.org Association Franỗaise des Entreprises Privộes (AFEP) & Mouvement des Entreprises de France (“MEDEF”), Report of the Committee on Corporate Governance (Viénot II) (July 1999) http://www2.eycom.ch/corporate-governance/reference/pdfs/11/en.pdf  Conseil National du Patronat Franỗais (CNPF) & Association Franỗaise des Entreprises Privộes (“AFEP”), The Boards of Directors of Listed Companies in France (Viénot I) (July 10, 1995) http://www.ecgi.org/codes/country_documents/france/vienot1_en.pdf  CNPF & AFEP, Stock Options: Mode d’Emploi pour les Enterprises (“Lévy-Lang Report”) (1995) GERMANY  Government Commission German Corporate Governance Code, German Corporate Governance Code (February 26, 2002, revised May 21, 2003) http://www.gurn.info/topic/corpgov/kdd03.pdf  Government Panel on Corporate Governance, Recommendations (“Baums Report”) (July 2001) http://www.ovs.de/corporate_governance.htm English summary available upon request at gpw@davisglobal.com  German Panel on Corporate Governance, Corporate Governance Rules for German Quoted Companies (January 2000, revised July 2000) http://www.dai.de/internet/dai/dai-2-0.nsf/home_en.htm **  Berliner Initiativkreis, German Code of Corporate Governance (June 6, 2000) http://www.gccg.de/eng_German-Code-of-Corporate-Governance.pdf * Investor viewpoint ** Hybrid viewpoint (investors, academics and private business sector representatives) NY1:\1230423\09\QD#F09!.DOC\99990.0899 App-31 APPENDIX II   INTERNATIONAL LISTING OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE Deutsche Schutzvereinigung für Wertpapierbesitz e.V (“DSW”), DSW Guidelines (June 1998).* Deutsche Bundestag, Gestez zur Kontroll und Tranzparenz im Unternehmensbereich (Law on Control and Transparency in the Corporate Sector) (“KonTraG”) (March 1998) http://www.ecgi.org/codes/country_documents/germany/gkontrag.pdf GREECE  Federation of Greek Industries, Principles of Corporate Governance (August 2001) English translation by Weil, Gotshal & Manges LLP (January 2002) available upon request at http://www.Holly.Gregory@weil.com  Capital Market Commission, Committee on Corporate Governance, Principles on Corporate Governance in Greece: Recommendations for its Competitive Transformation (“Mertzanis Report”) (October 1999) http://www.eccg.org/codes/country_documents/greece/greece_engl.pdf HONG KONG  Hong Kong Society of Accountants (“HKSA”), Corporate Governance for Public Bodies – a Basic Framework (2004) http://www.hksa.org.hk/publications/corporategovernanceguides/eframework_guide.pdf  HKSA, A Guide for Effective Audit Committees (2002) Available upon request at http://www.hksa.org.hk/professionaltechnical/corporategov/index.php  HKSA, Corporate Governance Disclosure in Annual Reports: A Guide to Current Requirements and Recommendations for Enhancement (March 2001) Available upon request at http://www.hksa.org.hk/publications/corporategovernanceguides/index.php  Stock Exchange of Hong Kong (“SEHK”), Code of Best Practice (December 1989; revised June 1996, February 1999, August 2000) http://www.thecorporatelibrary.com/Governance-Research/intl-regs/international/hongkong/hk-codes.pdf  SEHK, Model Code for Securities Transactions by Directors of Listed Companies (August 2000) http://www.ecgi.org/codes/country_documents/hong_kong/mso9F88.pdf HUNGARY  Budapest Stock Exchange, Corporate Governance Recommendations (2004) http://www.ecgi.org/codes/code.php?code_id=57 ICELAND  Iceland Stock Exchange (“ICEX”), Iceland Chamber of Commerce & Confederation of Icelandic Employers, Guidelines on Corporate Governance (March 16, 2004) http://www.ecgi.org/codes/country_documents/iceland/cg_guidelines_en.pdf INDIA  Securities & Exchange Board of India (“SEBI”), Report of the Committee Appointed by the SEBI on Corporate Governance (February 2000) http://web.sebi.gov.in/commreport/corpgov.html  Confederation of Indian Industry, Desirable Corporate Governance – A Code (April 1998) http://www.ciionline.org/Services/68/Images/desirable%20corporate %20governance240902.pdf INDONESIA  National Committee for Corporate Governance, Code of Good Corporate Governance (April 2001) http://www.ecgi.org/codes/code.php?code_id=61 * Investor viewpoint ** Hybrid viewpoint (investors, academics and private business sector representatives) NY1:\1230423\09\QD#F09!.DOC\99990.0899 App-32 APPENDIX II INTERNATIONAL LISTING OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE IRELAND  Irish Association of Investment Managers (“IAIM”), Corporate Governance, Share Option and Other Incentive Scheme Guidelines (March 1999) http://www.iaim.ie/files/Corp_Gov_Share_Option_guidelines.doc *  IAIM, Statement of Best Practice on the Role and Responsibilities of Directors of Public Limited Companies (1992).* ITALY  Committee for the Corporate Governance of Listed Companies, Report & Code of Conduct (“Preda Report”) (October 1999, revised July 2002) http://www.borsaitalia.it/opsmedia/pdf/8077.pdf  Commissione Nazionale per le Società e la Borsa (“Consob”), 2002 Corporate Code of Conduct (July 2002, revised May 2, 2003) Available upon request at http://www.consob.it  Ministry of the Italian Treasury, Report of the Draghi Committee (Audizione Parlamentare, Prof Mario Draghi, Direttore Generale de Tesoro) (December 1997) JAPAN  Tokyo Stock Exchange, Listed Company Corporate Governance Committee, Principles of Corporate Governance for Listed Companies (May 4, 2004) http://www.tse.or.jp/english/listing/cg/principles.pdf  Japan Corporate Governance Committee of the Japan Corporate Governance Forum, Revised Corporate Governance Principles (October 26, 2001) http://www.jcgf.org/en/  Kosei Nenkin Kikin Rengokai (Pension Fund Corporate Governance Research Committee), Action Guidelines for Exercising Voting Rights (June 1998) *  Japan Federation of Economic Organizations (Keidanren), Urgent Recommendations Concerning Corporate Governance (Provisional Draft, Sept 1997) http://www.ecgi.org/codes/country_documents/japan/jfeo_sep1997.pdf KENYA  Government of Kenya, Code/Guidelines of Best Practice in State-Owned Corporations: A Summary (no date) http://www.cipe.org/regional/africa/code.pdf  Private Sector Initiative for Corporate Governance, Principles for Corporate Governance in Kenya and a Sample Code of Best Practice for Corporate Governance (November 1999, revised July 2000) http://www.ecgi.org/codes/country_documents/kenya/principles_2.pdf KOREA, REPUBLIC OF  Korea Stock Exchange et al Committee on Corporate Governance, Code of Best Practice for Corporate Governance (September 1999) http://www.ecgi.org/codes/country_documents/korea/code_korea.pdf KYRGYZ REPUBLIC  Kyrgyz Republic Office of the Prime Minister, Department of Economic Sectors Development, Model Charter of a Shareholding Society of Open Type (Approved by decree of government July 26, 1997) http://www.thecorporatelibrary.com/Governance-Research/intl-regs/international/kyrgyzrepublic.html  Working Group on Corporate Governance, Handbook on Best Practice – Corporate Governance in the Kyrgyz Republic (July 26, 1997) * Investor viewpoint ** Hybrid viewpoint (investors, academics and private business sector representatives) NY1:\1230423\09\QD#F09!.DOC\99990.0899 App-33 APPENDIX II INTERNATIONAL LISTING OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE LITUANIA  National Stock Exchange of Lithuania (“NSEL”), The Corporate Governance Code for the Companies Listed on the National Stock Exchange of Lithuania (April 23, 2004) http://www.nse.lt/nvpb/teisesaktai/code.pdf MALAYSIA  Malaysian Institute of Chartered Secretaries and Administrators, Good Governance Guides (March 16, 2004) http://www.maicsa.org.my/good_governance/  Finance Committee on Corporate Governance, Malaysian Code on Corporate Governance (March 20, 2000) http://www.acga-asia.org/loadfile.cfm? SITE_FILE_ID=78 MALTA  Malta Stock Exchange Working Group on Corporate Governance, The Code of Principles of Good Corporate Governance (October 1, 2001) http://www.borzamalta.com.mt/Corporate%20Governance/section2.htm MEXICO  El Consejo Coordinador Empresarial (“CCE”) y la Comisión Nacional Bacaria y de Valores (“CNBV”), Corporate Governance Code for Mexico (June 9, 1999) http://www.ecgi.org/codes/country_documents/mexico/mexico_code_en.pdf THE NETHERLANDS  Corporate Governance Committee (“Tabaksblat Committee”), The Dutch Corporate Governance Code: Principles of Good Corporate Governance and Best Practice Provisions (December 9, 2003) http://corpgov.nl/page/downloads/CODE percent20DEF percent20ENGELS percent20COMPLEET percent20III.pdf  Stichting Corporate Governance Onderzoek voor Pensioenfondsen (“SCGOP”) (Foundation for Corporate Governance Research for Pension Funds), Corporate Governance Handbook of the SCGOP (August 2001) http://www.scgop.nl/downloads/Handbook_scgop.pdf *  Committee on Corporate Governance, Corporate Governance in the Netherlands – Forty Recommendations (“Peters Code”) (June 1997) http://www.ecgi.org/codes/country_documents/netherlands/nl-peters_report.pdf  Vereniging van Effectenbezitters (“VEB”), Ten Recommendations on Corporate Governance in the Netherlands (1997).* NEW ZEALAND  Institute of Chartered Secretaries and Administrators (“ICSA”) New Zealand, Good Governance Guides (May 8, 2004) http://www.csnz.org/Library/Good_Governance/index.asp  Institute of Chartered Accountants of New Zealand, Corporate Governance Principles (November 2003) http://www.ecgi.org/codes/code.php?code_id=147  New Zealand Exchange Limited, NZX Corporate Governance Best Practice Code (August 2003) http://www.nzx.com/regulation/govt_securities_legislation/best_practice_code  Institute of Directors in New Zealand, under the aegis of the Commonwealth Association for Corporate Governance (“CACG”), Best Practice Statements for Boards and Directors in New Zealand (August 2000) Available upon request at iod_nz@compuserve.com NIGERIA  Nigerian Security and Exchange Commission & the Corporate Affairs Commission, Code of Good Corporate Governance (November 2003) * Investor viewpoint ** Hybrid viewpoint (investors, academics and private business sector representatives) NY1:\1230423\09\QD#F09!.DOC\99990.0899 App-34 APPENDIX II INTERNATIONAL LISTING OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF NORWAY  Norwegian Shareholders Association, et al., The Norwegian Code of Practice for Corporate Governance (December 7, 2004) http://www.ecgi.org/codes/documents/cg_norway_en.pdf ** BEST PRACTICE PAKISTAN  Securities & Exchange Commission of Pakistan, Code of Corporate Governance (March 28, 2002) http://www.secp.gov.pk/news/code_corporate(revised).htm  Institute of Chartered Accountants of Pakistan (“ICAP”) Committee on Corporate Governance, Recommendations for Code of Corporate Governance in Pakistan (March 4, 2002) http://secp.gov.pk/corporatelaws/pdf/recommendation.pdf PERU  Comisió Nacional Supervisora de Empresas y Valores (“CONASEV”), et al., Principles of Good Governance for Peruvian Companies, http://www.ecgi.org/codes/documents/code_jul2002_en.pdf  Centro de Estudios de Marcado de Capitales y Financiero, Código de Buen Gobierno Corporativo para Empresas de Valores (November 2001) http://www.ecgi.org/codes/country_documents/peru/codigocbgc2811011difusion.pdf THE PHILIPPINES  Securities & Exchange Commission, Manual on Corporate Governance – Model Corporation (May 28, 2002) http://www.sec.gov.ph/Documents/manual.pdf  Securities & Exchange Commission, Code of Corporate Governance (April 4, 2002) http://www.chanrobles.com/secmemorandumcircularno022002.html#CODE %20OF%20CORPORATE%20GOVERNANCE  Institute of Corporate Directors, Code of Proper Practices for Directors (March 30, 2000) http://www.icd.ph/codeofproper.html POLAND  Polish Corporate Governance Forum, Best Practices in Public Companies (July 4, 2002, revised October 29, 2004) http://www.ecgi.org/codes/documents/pol_best_practice_2005_final.pdf  Gdansk Institute for Market Economics and Polish Corporate Governance Forum, The Corporate Governance Code for Polish Listed Companies (June 2002) http://www.pfcg.org.pl/files/download/code_final_complete.pdf PORTUGAL  Comissäo Mercado de Valores Mobiliários (Securities Market Commission), Recommendations on Corporate Governance (November 1999, revised December 2001) http://www.cmvm.pt/english_pages/recomendacoes_e_orientacoes/recomendacoes/soccot/indice_soccot.asp Amended (November 2003) http://www.ecgi.org/codes/code.php?code_id=153 ROMANIA  University of Bucharest International Center for Entrepreneurial Studies, and the Strategic Alliance of Business Associations, Corporate Governance Code (June 24, 2000) http://www.ecgi.org/codes/country_documents/romania/romania.pdf * Investor viewpoint ** Hybrid viewpoint (investors, academics and private business sector representatives) NY1:\1230423\09\QD#F09!.DOC\99990.0899 App-35 APPENDIX II INTERNATIONAL LISTING OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE RUSSIA  Federal Securities Commission, Corporate Governance Code (April 4, 2002) http://www.ecgi.org/codes/documents/final_code_english.pdf  Yeltsin, Boris, President of the Russian Federation & Parker School of Foreign & Comparative Law, Columbia University, Decree on Measures to Ensure the Rights of Shareholders (as amended, October 27, 1993) (Release No 28, TRANSNATIONAL JURIS, 1996) SINGAPORE  Singapore Association of the Institute of Chartered Secretaries and Administrators, Good Governance Guides (May 8, 2004) http://www.saicsa.org.sg/about_us_goodgovernance.htm  Corporate Governance Committee of the Singapore Institute of Directors, Code of Corporate Governance (March 21, 2001) http://www.mof.gov.sg/cor/doc/cgcfinalrpt.doc  Stock Exchange of Singapore, Best Practices Guide (1998) http://www.dbs.com/dbsgroup/annual98/bpguide.html SLOVAKIA  Bratislava Stock Exchange, Corporate Governance Code (based on the OECD Principles) (September 2002) http://www.ecgi.org/codes/country_documents/slovakia/corp_gov_code.pdf SLOVENIA  Ljubljana Stock Exchange, the Association of Supervisory Board Members of Slovenia, and the Managers’ Association, Corporate Governance Code (March 18, 2004) http://www.ljse.si/StrAng/LJSEProf/CGC/CORPORATE_GOVERNANCE_CODE.pdf SOUTH AFRICA  Institute of Directors in Southern Africa, The King Report on Corporate Governance (“King Report,” November 1994; revised as “King II Report,” March 2002) Executive Summary http://www.ecgi.org/codes/country_documents/south_africa/executive_summary.pdf; full Report available upon request at http://www.iodsa.co.za SPAIN  Instituto de Consejeros-Administradores, Principles of Good Corporate Governance: Code of Good Practices for Boards and Directors (June 2004, English version December 2004) Available upon request at http://www.iconsejeros.com  Asociación Espola de Directivos (“AED”), Decálogo del Directivo – Principios y valores de actiación del directivo para el buen gobierno de la empresa (May 2004) http://www.aed96.es/decalogo_del_directivo.pdf  Comisión Especial, Informe de la Comisión Especial para el Fomento de la Transparencia y Seguridad en los Mercados y en las Sociedades Cotizadas (“Aldama Report”) (January 8, 2003) http://www.ecgi.org/codes/country_documents/spain/informefinal_e.pdf  Comisión Especial para el Estudio de un Código Etico de los Consejos de Administración de las Sociedades, The Governance of Spanish Companies (February 1998): http://www.cnmv.es/delfos/Tendencias/espa%F1a3.htm  El Circulo de Empresarios, Una propuesta de normas para un mejor funcionamiento de los Consejos de Administración (October 1996) http://www.ecgi.org * Investor viewpoint ** Hybrid viewpoint (investors, academics and private business sector representatives) NY1:\1230423\09\QD#F09!.DOC\99990.0899 App-36 APPENDIX II INTERNATIONAL LISTING OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE SRI LANKA  Institute of Chartered Accountants of Sri Lanka, Code of Best Practice: Report of the Committee to Make Recommendations on Matters Relating to Financial Aspects of Corporate Governance (December 12, 1997) Available upon request at icaweb@lanka.net SWEDEN  The Code Group, Swedish Code of Corporate Governance (2005) http://www.ecgi.org/codes/documents/swe_codes_group_en_mar2005.pdf  Swedish Shareholders Association, Corporate Governance Policy (October 26, 2001) http://www.aktiesparana.se English translation: http://www.ecgi.org/codes/documents/corporate_governance_policy0201.pdf *  Swedish Academy of Directors, Western Region, Introduction to a Swedish Code of “Good Boardroom Practice” (March 27, 1995) Available upon request at bandreaz@vast.styrakad.se SWITZERLAND  Swiss Stock Exchange (“SWX”), Directive on [Disclosure of] Information Relating to Corporate Governance (August 2002) http://www.swx.com/admission/cg_intro_en.html  Panel of Experts on Corporate Governance, Swiss Code of Best Practice (“Böckli Report”) (Final Draft, March 25, 2002) http://www.economiesuisse.ch ** THAILAND  Stock Exchange of Thailand (“SET”), The Roles, Duties and Responsibilities of the Directors of Listed Companies (December 1997; revised October 1999) http://www.acga-asia.org/loadfile.cfm?SITE_FILE_ID=146 TURKEY  Capital Markets Board of Turkey, Corporate Governance Principles (July 23, 2003) http://www.cmb.gov.tr/News/corporate_governance.pdf  Turkish Industrialists’ and Businessmen’s Association, Corporate Governance Code of Best Practice: Composition and Functioning of the Board of Directors (December 2002) http://www.tusiad.us/Content/uploaded/CORP-GOV.PDF UNITED KINGDOM  Pensions Investment Research Consultants (“PIRC”), PIRC Shareholder Voting Guidelines (1993, revised 2005) Available upon request at http://www.pirc.co.uk/pubserv.htm *  Association of British Insurers, ABI Guidelines, Guidance Notes and Other Relevant Material (1993, most recently revised 2004) *  Institute of Chartered Secretaries and Administrators (“ICSA”) UK, ICSA UK Guidance Notes and Best Practice Guides (May 8, 2004) http://www.icsa.org.uk/news/guidance_uk.php  The Financial Reporting Council (“FRC”), The Combined Code on Corporate Governance (July 1998, revised July 2003) http://www.asb.org.uk/documents/pdf/combinedcodefinal.pdf  Derek Higgs, Review of the Role and Effectiveness of Non-Executive Directors (“Higgs Report”) (January 20, 2003) http://www.dti.gov.uk/cld/non_exec_review/pdfs/higgsreport.pdf  Financial Reporting Council Group, Audit Committees Combined Code Guidance (“Smith Report”) (January 20, 2003) http://www.ecgi.org/codes/documents/ac_report.pdf  Hermes Pensions Management Limited, The Hermes Principles (October 21, 2002) http://www.hermes.co.uk/corporate-governance/PDFs/statement.pdf * * Investor viewpoint ** Hybrid viewpoint (investors, academics and private business sector representatives) NY1:\1230423\09\QD#F09!.DOC\99990.0899 App-37 APPENDIX II              INTERNATIONAL LISTING OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE Institutional Shareholders’ Committee, The Responsibilities of Institutional Shareholders and Agents – Statement of Principles (October 21, 2002) * http://www.investmentfunds.org.uk/investmentuk/press/2002/20021021-01.pdf Paul Myners, Institutional Investment in the United Kingdom: A Review (“Myners Report”) (March 6, 2001) http://www.hm-treasury.gov.uk/media//843F0/31.pdf * Hermes Investment Management Ltd., Statement on UK Corporate Governance & Voting Policy (March 1997, revised January 2001) http://www.hermes.co.uk * Association of Unit Trusts and Investment Funds, Code of Good Practice (January 2001) http://www.investmentfunds.org.uk * National Association of Pension Funds (“NAPF”), Towards Better Corporate Governance (June 5, 2000) http://www.ecgi.org/codes/country_documents/uk/hermes_principles.pdf * Institute of Chartered Accountants in England and Wales, Internal Control: Guidance for Directors on the Combined Code (“Turnbull Report”) (September 1999) http://www.icaew.co.uk/viewer/index.cfm?AUB=TB2I_6342 Law Commission & The Scottish Law Commission, Company Directors: Regulating Conflicts of Interests and Formulating a Statement of Duties (September 1999) Committee on Corporate Governance (sponsored by the London Stock Exchange et al.), Final Report (“Hampel Report”) (January 1998) http://www.ecgi.org/codes/documents/hampel_index.htm Study Group on Directors’ Remuneration, Directors’ Remuneration (“Greenbury Report”) (July 1995) http://www.ecgi.org/codes/documents/greenbury.pdf Institute of Directors, Good Practice for Directors – Standards for the Board (1995) Report of the Committee on the Financial Aspects of Corporate Governance (“Cadbury Report”) (December 1, 1992, reissued April 1996) http://www.ecgi.org/codes/documents/cadbury.pdf Institutional Shareholders’ Committee, The Role and Duties of Directors: A Statement of Best Practice (April 1991) * Institute of Chartered Secretaries and Administrators, Good Boardroom Practice: A Code for Directors and Company Secretaries (February 1991, reissued 1995) Available upon request at http://www.icsa.org.uk/news/guidance_uk.php UNITED STATES  California Public Employees’ Retirement System (“CalPERS”), Corporate Governance Principles and Guidelines – United States (April 13, 1998, updated April 5, 2005) http://www.calpers-governance.org/principles/domestic/us/downloads/us-corpgov-principles.pdf *  National Association of Corporate Directors (“NACD”), Report of the NACD Blue Ribbon Commission on Director Professionalism (November 1996, reissued 2001, 2005) Available upon request at http://www.nacdonline.org  Institutional Shareholder Services (“ISS”), U.S Proxy Voting Manual (2005) Available to subscribers at http://www.issueatlas.com *  New York Stock Exchange (“NYSE”), Corporate Governance Rules (revised November 4, 2003, further revised November 3, 2004) http://www.nyse.com/pdfs/section303A_final_rules.pdf     Council of Institutional Investors (“CII”), Corporate Governance Policies (March 1998, most recently revised October 13, 2004) http://www.cii.org/policies/corpgovernance.htm * General Motors Board of Directors, GM Corporate Governance Guidelines (January 1994, most recently revised June 2004) http://www.gm.com/company/investor_information/corp_gov/guidelines.html American Bar Association, Committee on Corporate Laws, Section of Business Law, Corporate Director’s Guidebook (1978; 4th ed 2004) Available upon request at http://www.abanet.org/webapp/wcs/stores/servlet/ProductDisplay?storeId=10251&productId=-18600&categoryId=-3582 Teachers Insurance and Annuity Association – College Retirement Equities Fund (“TIAA-CREF”), TIAA-CREF Policy Statement on Corporate Governance (October 1997, most recently revised January 2004) http://www.tiaa-cref.org/pubs/pdf/governance_policy.pdf * * Investor viewpoint ** Hybrid viewpoint (investors, academics and private business sector representatives) NY1:\1230423\09\QD#F09!.DOC\99990.0899 App-38 APPENDIX II             INTERNATIONAL LISTING OF CORPORATE GOVERNANCE GUIDELINES AND CODES OF BEST PRACTICE Blue Ribbon Commission on Improving the Effectiveness of Corporate Audit Committees, Report and Recommendations (sponsored by the New York Stock Exchange & the National Association of Securities Dealers) (1999, revised 2004) http://www.nacdonline.org/publications/pubDetails.asp?pubID=228 National Association of Securities Dealers, Inc (“NASD”), Nasdaq Marketplace Rules (November 2003) http://www.nasdaq.com/about/RecentRuleChanges.stm The Business Roundtable (“BRT”), Principles of Corporate Governance (May 2002) http://www.brt.org/pdf/704.pdf The Conference Board Commission on Public Trust and Private Enterprise, Findings and Recommendations, Part 1: Executive Compensation; Part 2: Corporate Governance & Part 3: Audit and Accounting (2003) http://www.conference-board.org/pdf_free/758.pdf American Federation of Labor and Congress of Industrial Organizations (“AFL-CIO”), Exercising Authority, Restoring Accountability – AFL-CIO Proxy Voting Guidelines (1997, revised 2003) http://www.aflcio.org/corporateamerica/capital/upload/proxy_voting_guidelines.pdf * Corporate Governance Center, Kennesaw State University, 21st Century Governance and Financial Reporting Principles (March 26, 2002) http://ksumail.kennesaw.edu/~dhermans/principl.htm BRT, Statement on Corporate Governance (September 1997) American Society of Corporate Secretaries, Suggested Guidelines for Public Disclosure and Dealing with the Investment Community (1997) NACD, Report of the NACD Blue Ribbon Commission on Performance Evaluation of Chief Executive Officers, Board and Directors (1994) American Law Institute (“ALI”), Principles of Corporate Governance: Analysis & Recommendations (1994, revised 2002) Available upon request at http://www.ali.org/index.htm BRT, Statement on Corporate Governance and American Competitiveness (1990) BRT, The Role and Composition of the Board of Directors of the Large Publicly Owned Corporation (January 1978) ZIMBABWE  Institute of Chartered Secretaries and Administrators in Zimbabwe, Good Governance Guide (May 8, 2004) http://www.icsaz.co.zw/news_index.html * Investor viewpoint ** Hybrid viewpoint (investors, academics and private business sector representatives) NY1:\1230423\09\QD#F09!.DOC\99990.0899 App-39 Weil, Gotshal & Manges LLP — Worldwide Offices 767 Fifth Avenue New York, NY 10153-0119 Tel: +1 212 310 80 00 Fax: +1 212 310 80 07 UNITED STATES Austin INTERNATIONAL Silicon Valley Brussels London Prague 700 Louisiana Suite 1600 Houston, TX 77002 Tel: +1 713 546 50 00 Fax: +1 713 224 95 11 201 Redwood Shores Parkway Redwood Shores, CA 94065 Tel: +1 650 802 30 00 Fax: +1 650 802 31 00 81 Avenue Louise, Box 9-10 1050 Brussels Belgium Tel: +32 543 74 60 Fax: +32 543 74 89 One South Place London, EC2M 2WG England Tel: +44 207 903 10 00 Fax: +44 207 903 09 90 Charles Bridge Center Krizovnické Nám 110 00 Prague 1, Czech Republic Tel: +420 21 40 73 00 Fax: +420 21 40 73 10 Boston Miami Washington Budapest Munich Shanghai 100 Federal Street 34th Floor Boston, MA 02110 Tel: +1 617 772 83 00 Fax: +1 617 772 83 33 1395 Brickell Avenue Suite 1200 Miami, FL 33131 Tel: +1 305 577 31 00 Fax: +1 305 374 71 59 1501 K Street Suite 100 Washington, DC 20005 Tel: +1 202 682 70 00 Fax: +1 202 857 09 39 +1 202 857 09 40 Bank Center Granite Tower H-1944 Budapest Hungary Tel: +36 302 91 00 Fax: +36 302 91 10 Maximilianhöfe Maximilianstrasse 13 80539 Munich Germany Tel: +49 89 42 43-0 Fax: +49 89 42 43 – 399 4101 CITIC Square 1168 Nanjing Road West Shanghai Peoples’ Republic of China Tel.: +8621 3217 4618 Dallas Providence Wilmington Frankfurt am Main Paris Singapore 200 Crescent Court Suite 300 Dallas, TX 75201-6950 Tel: +1 214 746 77 00 Fax: +1 214 746 77 77 50 Kennedy Plaza Providence, RI 02903 Tel: +1 401 278 4700 Fax: +1 401 278 4701 1201 N Market Street 14th Floor Wilmington, DE 19801 Tel: +1 302 656 1410 Fax: +1 302 656 1405 Maintower Box 19 Neue Mainzer Strasse 52 60311 Frankfurt am Main Germany Tel: +49 69 21659 600 Fax: +49 69 21659 699 2, Rue de la Baume 75008 Paris France Tel: +331 44 21 97 97 Fax: +331 42 89 57 90 Battery Road, #26-01 Bank of China Building Singapore 049908 Tel.: +65 535 36 00 Fax.: +65 538 85 98 8911 Capital of Texas Highway Suite 1350 Austin, TX 78759 Tel: +512-349-1930 Fax: +512-527-0798 Houston Warsaw Warsaw Financial Center ul Emilii Plater 53 00-113 Warsaw Poland Tel: +48 22 520 40 00 Fax: +48 22 520 40 01 NY1:\1230423\09\QD#F09!.DOC\99990.0899 On April 10, 2003, the SEC released the text of the rules it adopted under Section 301 of the Act, requiring all U.S stock exchanges and Nasdaq to adopt listing standards setting certain minimum standards regarding the composition and functions of audit committees (Release No 33-8220) On November 4, 2003, the SEC approved (Release No 34-48745) revised corporate governance listing standards (as amended) previously filed by the NYSE, adopting a new Section 303A of the NYSE Listed Company Manual, and revised corporate governance listing standards (as amended) previously filed by Nasdaq, adopting a new Marketplace Rule 4350 and related rules The SEC approved on November 3, 2004 (Release No 34-50625; File No SR-NYSE-2004-41), effective immediately, certain amendments, largely of a supplemental and clarifying nature, to such NYSE listing standards On January 12, 2004, (Release No 34-49060, File No SR-NASD-2003172), May 19, 2004 (Release No 34-49753; File No SR-NASD-2004-69) and June 22, 2004 (Release No 34-49901; File No SR-NASD-2004-80), the SEC approved certain amendments, largely of a technical and clarifying nature, to such Nasdaq listing standards i For this purpose, the NYSE looks to the concept of “group” set out in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and expects that generally a group would have an obligation to file on Schedule 13D or 13G with the SEC acknowledging such group status See NYSE Corporate Governance Listing Standards Frequently Asked Questions, available at www.nyse.com (updated as of February 13, 2004) [“NYSE FAQs”] In order for a group to exist for purposes of the Nasdaq rules, the shareholders must have publicly filed a notice that they are acting as a group, e.g., a Schedule 13D or 13G See Nasdaq IM-4350-4, available at http://www.nasdaq.com/about/CorporateGovernance.pdf (updated as of April 15, 2004) ii Nasdaq-listed limited partnerships are governed by a separate Nasdaq governance listing standard that reflects certain of the listing standards applicable to corporations Marketplace Rule 4360 iii Certain Nasdaq requirements became effective at earlier dates, as indicated in the annotations to the requirements presented below iv Specifically, with respect to the requirement that the audit, compensation, nominating and (in the case of the NYSE) governance committees each be composed entirely of independent directors, newly listed companies may phase in their compliance with the requirement by having one independent director on the committee at the time of initial listing, a majority of the members within 90 days after the listing and achieving full compliance within one year after listing In addition, newly listed companies have a one year period to satisfy the requirement that a majority of the board members be independent Companies that have emerged from bankruptcy and that have ceased to be controlled companies have the same phase-in period for satisfying the requirements for an independent compensation and nominating/governance committee and a majority of independent directors as companies that are newly listed Somewhat different requirements apply to companies that transfer from one market to another See NYSE Listed Company Manual § 303A and Nasdq Marketplace Rule 4350(a) vi Nasdaq contemplates that executive sessions should occur at least twice per year See Nasdaq IM-4350-4, available at http://www.nasdaq.com/about/CorporateGovernance.pdf (updated as of April 15, 2004) v References to a listed company for these purposes include a parent or subsidiary that is in a consolidated group with the listed company See the discussion under “Shareholdings.” vii A material relationship “can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others.” viii For purposes of Section 303A, 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 ix For purposes of Section 303A, the term “executive officer” has the same meaning specified for the term “officer” in Exchange Act Rule 16a-1(f) Rule 16a-1(f) provides that the term “officer” shall include the company’s president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice president of the company in charge of a principal business unit, division or function, any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the issuer x Service as an interim Chairman, CEO or other executive officer does not automatically disqualify a person from being considered independent following such employment xi Compensation need not be considered for this independence test if received (i) for prior service as an interim Chairman, CEO or other executive officer or (ii) by an immediate family member for service as an employee (other than an executive officer) of the listed company xii A “parent” or “subsidiary” includes entities that are controlled by the issuer and are consolidated with the financial statements of the issuer as filed with the SEC (but not if the issuer reflects such entity solely as an investment in its financial xiii statement) For purposes of Rule 4350, a family member includes a person’s spouse, parents, children, siblings, mothers- and fathersin-law, sons- and daughters-in-law, brothers- and sisters-in-law, whether by blood, marriage or adoption, or someone who has the same residence as the person xiv References to “executive officer” mean those officers covered by Exchange Act Rule 16a-1(f) See Nasdaq IM-4350-4, available at http://www.nasdaq.com/about/CorporateGovernance.pdf (updated as of April 15, 2004) xv On November 3, 2004, the NYSE adopted a substantive change to the director-auditor relationship test in Section 303A.02(b)(iii), which previously had not considered the role an immediate family member of a director played in an audit as long as the family member acted in a professional capacity for the firm A number of companies had found directors precluded from independence under the prior test because of past personal or family member affiliations with an audit firm, even though the person involved never worked on the listed company’s account The revised standard narrowed the disqualifying relationships of those now specified However, as a result of the amendment to Section 303A.02(b)(iii), certain directors that were previously eligible to be considered independent are precluded from independence under the revised standard; namely, a director with an immediate family member who is a current partner of the audit firm no longer qualifies as independent Under the prior standard, a director would still qualify as independent if the immediate family member did not act in “a professional capacity” at the audit firm Companies will have until their first annual meeting after June 30, 2005, to replace a director who was independent under the prior standard but who is not independent under the revised standard xvi Section 303A.02(b)(iv) provides that a director is not independent if “the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the listed company's present executive officers at the same time serve or served on that company's compensation committee.” The NYSE has interpreted this standard – due to the three-year look back period – not to require a classic simultaneous interlock; that is, it does not require that the two crossing relationships occur at the same point in time during the three year period xvii The payments and consolidated gross revenue numbers to be used for this independence test must be those from the last completed fiscal year Contributions to tax-exempt organizations are not considered “payments” for purposes of this independence test However, the listed company must disclose in its annual proxy statement (or, if the company does not file a proxy statement, in the company’s annual report) any such contributions from the company to a tax-exempt organization that one of their directors is an executive officer of, if, within the previous three years, contributions in any single fiscal year exceeded the greater of 2% of such charity’s consolidated gross revenues or $1 million Furthermore, companies may have business relationships (as a vendor, for example) with a charitable organization, and payments related to such business relationships are intended to be covered by this test xviii The following payments are excluded from the $60,000 limitation: (i) payments received as compensation for board or committee service, (ii) payments arising solely from investments in the company’s securities, (iii) compensation paid to an immediate family member who is an employee of the company or a parent or subsidiary of the company (but not if such person is an executive officer of the company or a parent or subsidiary of the company), (iv) loans from a financial institution (provided such loans were made in the ordinary course of business on prevailing market terms for comparable transactions, did not involve more than a normal degree of risk or other unfavorable factors, and were not otherwise subject to the specific disclosure requirements of Regulation S-K, Item 404), (v) payments from a financial institution in connection with the deposit of funds or the financial institution acting in an agency capacity (provided such payments were made in the ordinary course of business on prevailing market terms for comparable transactions and were not otherwise subject to the specific disclosure requirements of Regulation S-K, Item 404), (vi) benefits under a tax qualified retirement plan or nondiscretionary compensation and (vii) loans permitted under Section 402 of the Act xix Payments arising solely from investments in the company’s securities or under non-discretionary charitable contribution matching programs are not included in the limitation xx Indirect compensation includes payments to spouses, minor children or stepchildren and children or stepchildren sharing a home with the audit committee member, as well as payments accepted by an entity which provides accounting, consulting, legal, investment banking or financial advisory services to the company and in which the audit committee member is a partner, member, an officer such as a managing director or an executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions) xxi Also exempt from the “affiliated person” requirement is an audit committee member that sits on the board of directors of both a listed issuer and an affiliate of the listed issuer, if the audit committee member otherwise meets the independence requirements for both the issuer and the affiliate It is recommended that a company disclose in its annual proxy statement (or, if the company does not file a proxy statement, in its annual report) if any audit committee member is deemed independent but falls outside of the safe harbor provisions of Exchange Act Rule 10A-3(e)(1)(ii) xxii Companies were required to comply with the audit committee financial expert disclosure requirements in their annual reports for fiscal years ending on or after July 15, 2003, except small business issuers which must comply with the audit committee financial expert disclosure requirements in their annual reports for fiscal years ending on or after December 15, 2003 xxiii See “Codes of Conduct and Ethics” below regarding requirements of the Act and the NYSE listing standards requirements regarding conflict of interest matters in codes of conduct and ethics xxiv For this purpose, a related party transaction is one defined as such in Item 404 of Regulation S-K or, in the case of a small business issuer, Item 404 of Regulation S-B or, in the case of a non-U.S issuer, a transaction required to be disclosed pursuant to Item 7.B of Form 20-F xxv A company need not comply with the director nomination requirement if it is subject to a binding obligation (existing prior to November 4, 2003) that is inconsistent with this new listing standard xxvi Discussions regarding CEO compensation with the board generally are not precluded, as it is not the intent to impair communication among board members xxvii This provision in Section 303A.05(b)(i)(B) is not intended to preclude a board’s ability to delegate its authority to approve non-CEO executive officer compensation to the compensation committee xxviii Companies were required comply with the code of ethics disclosure requirements in their annual reports for fiscal years ending on or after July 15, 2003 xxix xxx Effective April 26, 2003 The company must include in its website its Code of Business Conduct and Ethics and state in its annual proxy statement (or, if the company does not file an annual proxy statement, in the company’s annual report) that its Code of Business Conduct and Ethics is available on the company’s website and are available in print to any shareholder who requests it xxxi The company must also state in its annual proxy statement (or, if the company does not file an annual proxy statement, in the company’s annual report) that its Corporate Governance Guidelines are available on the company’s website and are available in print to any shareholder who requests them xxxii The Commentary to Section 303A.12(a) states that “any CEO/CFO certifications required to be filed with the SEC regarding the quality of the company’s public disclosure” must be disclosed in the company’s annual report to shareholders The NYSE has clarified that the only CEO/CFO certification required to be included in the annual report to shareholders is that required by Section 302 of the Act with respect to the company’s Form 10-K (which contains the annual financial statements included in the annual report to shareholders) Section 303A.12(a) does not apply to certifications required under Section 906 of the Act, Section 302 certifications of quarterly financial statements filed as exhibits to Form 10-Q, or the internal control report required of management by Section 404 of the Act See NYSE FAQs xxxiii