Corporate Governance Guidelines: How to Improve Disclosure and Promote Better Corporate Governance in Public Companies
Corporate Governance Guidelines: How to Improve Disclosure and Promote Better Corporate Governance in Public Companies,
Florida State University Law Review
Available at: https://digitalcommons.law.villanova.edu/facpubs/5
If you are a shareholder of a public corporation, you may think it would be easy to find basic information about your shareholder rights, such as whether shareholders have the right to call special stockholder meetings. You would probably assume that the information would be disclosed in the company’s “Corporate Governance Guidelines,” (CGGs) which, according to a New York Stock Exchange (NYSE) rule, must be posted on the company’s website for shareholder review. But, as this article shows, companies are not required to disclose information about shareholder rights in their corporate governance guidelines, and most companies have chosen not to provide this information voluntarily. CGGs, therefore, have largely failed in their goals of promoting informed investors and improving the ability of shareholders to monitor board performance.
Although clearly an important part of a public company’s corporate governance, CGGs have not been given serious scholarly attention. This is the first article to address that deficiency. The article reviews and analyzes the CGGs of the fifty largest public companies in the United States. I discovered that CGGs generally do not disclose information on today’s most important corporate governance issues: those relating to shareholder rights and environment and social issues (ESG). The NYSE rule is stuck in the corporate governance environment of 2003, when the rule was adopted. It is time for the NYSE to revisit its rule to improve the effectiveness of CGGs.
Specifically, I recommend that listed companies should be required to provide more information on policies relating to shareholder rights and ESG. In addition, I recommend that the NYSE should adopt a new approach to CGG disclosure. Rather than simply requiring listed companies to disclose their corporate governance practices, the NYSE should require companies to disclose whether they have adopted a particular corporate governance policy and if they have not, why not. The increased disclosure and the new “disclose or explain” approach will ensure that shareholders are better informed and will lead to improved corporate governance at public companies.