30 Pages Posted: 17 Jul 2002
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: Suggested Citation
Bainbridge, Stephen M., A Critique of the NYSE's Director Independence Listing Standards (June 2002). UCLA School of Law, Research Paper No. 02-15. Available at SSRN: https://ssrn.com/abstract=317121 or http://dx.doi.org/10.2139/ssrn.317121