A Critique of the Nyse's Director Independence Listing Standards

30 Pages Posted: 17 Jul 2002

See all articles by Stephen M. Bainbridge

Stephen M. Bainbridge

University of California, Los Angeles (UCLA) - School of Law

Date Written: June 2002


Under the New York Stock Exchange's (NYSE) aegis, a blue ribbon panel has proposed new listing standards that would, inter alia, significantly increase the role of independent directors in public corporations. Despite the considerable hullabaloo surrounding the report's release, however, the report's recommendations in fact consist of little more than the warmed-over rejects of past corporate governance "reform" initiatives. This essay critiques the key director independence provisions of the NYSE Committee's report. The essay argues that those proposals are not supported by the evidence on director performance and, moreover, adopt an undesirable one size fits all approach. Firms have unique needs and should be free -- as state law now allows -- to develop unique accountability mechanisms carefully tailored for the firm's special needs. The SEC should not be further empowered to use its "raised eyebrow" regulatory powers as a vehicle to federalize corporate law. For all of these reasons, the NYSE should reject the Committee's proposals and leave development of corporate governance to state law and market forces.

Keywords: stock exchanges, corporate governance, independent directors

JEL Classification: K22

Suggested Citation

Bainbridge, Stephen Mark, A Critique of the Nyse's Director Independence Listing Standards (June 2002). Available at SSRN: https://ssrn.com/abstract=317121 or http://dx.doi.org/10.2139/ssrn.317121

Stephen Mark Bainbridge (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

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