The Business Roundtable has updated its Principles of Corporate Governance, last revised in 2010.  It would be easy to dismiss the Principles as 32 pages of platitudes and conventional wisdom, but it’s actually worth a look.  The Business Roundtable is far from a thought leader, but at the same time it is not as reflexively retrograde as some other business organizations that come to mind.  The Principles may not be bold, but it is rooted in a humility—we may not know all of the answers, and different situations may call for different approaches—that is welcome in a field more often characterized by rigidity and bluster.

You can think of the Principles as providing a useful, albeit lagging, indicator of what large U.S. public companies actually do, or at least aspire to do, in corporate governance.  Put it this way: if your company is not following a practice that the Principles recommends, it should be as a result of a conscious decision at the board level.

The general approach of the Principles is to be prescriptive as to matters that are thought to be noncontroversial (and that in many cases are already required by law or stock exchange rule), to be equivocal as to areas where the authors believe a consensus has not definitively emerged, and to be silent as to truly controversial areas.  Thus:

  • Prescriptive: Items in the 2012 update that are in the “every public company should” category include: having an independent chair or lead director; having a “substantial majority” of the board be independent; having a majority vote policy under which directors who fail to receive a majority must offer their resignation; establishing a risk oversight structure (although not usually a dedicated committee); annual succession planning sessions; board oversight of political activities; and board prioritization of dialogue with “long-term” shareholders.
  • Equivocal: Plenty of things that companies should “consider,” including separating the CEO and chair, using restricted stock rather than stock options for board compensation, adopting a disclosure policy with respect to political activities, board retirement age policies, and adopting a three audit committee membership limit (no reference to overboarding rules generally).
  • Unaddressed: Annual election of directors, proxy access, one share/one vote, shareholder rights to act by consent or call special meetings, and audit firm rotation.

You might consider including the Principles in your next board packet.