On November 25, 2009, the Securities and Exchange Commission (SEC) approved amendments to the New York Stock Exchange (NYSE) corporate governance rules.  The amendments, which become effective January 1, 2010, will, among other things:

Require Notification of Immaterial Non-Compliance with NYSE Corporate Governance Standards.  The amendments expand the requirement to notify the NYSE in writing after any executive officer becomes aware of any non-compliance with the NYSE corporate governance listing standards, instead of “material” non-compliance, as is currently required.

Eliminate Disclosure in Annual Report Regarding Certifications.  A company will no longer be required to disclose in its Annual Report on Form 10-K whether it has submitted to the NYSE an annual written affirmation certifying its compliance with the NYSE’s corporate governance listing standards.  The duty to file an annual certification with the NYSE remains in effect.

Harmonize Director Independence Disclosure Requirements with Item 407 of Regulation S-K.  The amendments replace specific disclosure requirements in the NYSE rules with references to the applicable disclosure requirements in Item 407 of Regulation S-K, which governs disclosure about director independence and certain other aspects of a company’s corporate governance practices.

Allow Exclusion of Non-Independent Directors from Executive Sessions.  The amendments clarify that companies may hold regular executive sessions of independent directors as an alternative to the current NYSE requirement to hold regular executive sessions of non-management directors.

Permit Increased Use of Web Site Disclosure.  Companies will be allowed to post certain disclosures on their web sites rather than include them in an annual report or proxy statement, such as:

• The director chosen to preside at executive sessions,
• The method by which interested parties (not just stockholders) can communicate directly with the lead independent director or the non-management or independent directors as a group,
• The amount of contributions made to tax exempt organizations for which any independent director serves as an executive officer, if the contributions exceed the NYSE-specified threshold, and
• The board determination that the service of an audit committee member on more than three public company audit committees does not impair his ability to serve effectively on the company’s audit committee.

In addition, companies will not be required to make hard copies of their corporate governance documents available in print at the request of stockholders if the documents are available on the company’s web site.

Clarify the Controlled Company Definition.  The amendments revise the definition of a “controlled company” to clarify that a controlled company is a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company.

Specify Disclosure Procedures for Code of Ethics Waivers.  Companies will be required to disclose within four business days that a waiver of its code of business conduct and ethics has been granted to an executive officer or director, instead of “promptly.”

Revise and Clarify Certain Phase-In Periods and Requirements.  The amendments make certain changes and clarifications to the phase-in periods for compliance with the NYSE corporate governance requirements applicable to companies listed in conjunction with an initial public offering, spin-off or carve-out.  In addition, the amendments add sections detailing the compliance requirements applicable to companies when they list on the NYSE upon emergence from bankruptcy, transfer from another market, ceasing to be controlled companies or ceasing to be foreign private issuers.

Recommendations

Public companies should take the following actions in light of these recent developments:

1. Review and revise the company’s disclosure controls and procedures, as appropriate, and provide training to ensure that executive officers are aware of the NYSE corporate governance requirements of Section 303A so that the company can make timely notification to the NYSE of any non-compliance.
2. Review the company’s proxy disclosures and governance documents (including committee charters and director and officer questionnaires) to determine whether any section references to the NYSE listing standards need updating.
3. Consider eliminating disclosure regarding the filing of certifications in compliance with the NYSE rules, and consider posting certain disclosures on the company’s web site in lieu of including them in the annual report or proxy statement.
4. Consider whether to continue offering to provide hard copies of corporate governance documents to stockholders upon request.

Contact Information

If you have questions or need additional information please contact:

R. Douglas Harmon
704-335-9020
dougharmon@parkerpoe.com

John C. Jaye
704-335-9872
johnjaye@parkerpoe.com

Charles Anderson, Jr.
704-335-9030
charlesanderson@parkerpoe.com

Alba-Justina Secrist
704-335-9090
ajsecrist@parkerpoe.com

J. Carlton Fleming, Jr.
704-335-9501
carltonfleming@parkerpoe.com