Principles of Corporate Governance 2016 by the Business Roundtable

”Foreword and Introduction

The Business Roundtable has been recognized for decades as an authoritative voice on matters affecting American business corporations and meaningful and effective corporate governance practices. Since The Business Roundtable last updated Principles of Corporate Governance in 2012, U.S. public companies have continued to adapt and refine their governance practices within the framework of evolving laws and stock exchange rules. Business Roundtable CEOs continue to believe that the United States has the best corporate governance, financial reporting and securities markets systems in the world. These systems work because they give public companies not only a framework of laws and regulations that establish minimum requirements but also the flexibility to implement customized practices that suit the companies’ needs and to modify those practices in light of changing conditions and standards.

Over the last several years, the external environment in which public companies operate has become increasingly complex for companies and shareholders alike. The increased regulatory burdens imposed on public companies in recent years have added to the costs and complexity of overseeing and managing a corporation’s business and bring new challenges from operational, regulatory and compliance perspectives. In addition, many U.S. public companies have a global profile; they interact with investors, suppliers, customers and government regulators around the world and do so in an era in which instant communication is the norm. Further, in the recent past, Congress has abandoned strict adherence to the fundamental principle of materiality, a central tenet of the disclosure requirements of the federal securities laws. Instead, Congress has sought to use the securities laws to address issues that are immaterial to shareholders’ investment or voting decisions. For example, Congress has required public companies to disclose information relating to conflict minerals and payments to foreign governments for resource extraction and mine safety, information that may be relevant in a social context but has little relevance to material information that a shareholder would need to make an investment decision.

The current environment has also been shaped by fundamental changes in shareholder engagement, which has become a central and essential topic for public companies and their boards, managers and investors in the early 21st century. Public companies have undertaken unprecedented levels of proactive engagement with their major shareholders in recent years. Many institutional investors have also increased their engagement efforts, dedicating significant resources to governance issues, company outreach, the development of voting policies and the analysis of the proposals on the ballots of their portfolio companies. In addition, overall levels of shareholder activism remain at record highs, imposing significant pressures on targeted companies and their boards……..”

Read the Principles of Corporate Governance 2016 by the Business Roundtable Association here.

Source: Business Roundtable

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