Abstract

As a public director of a NASDAQ stock exchange listed public corporation, I have seen how quickly the reforms in corporate governance imposed by the Sarbanes-Oxley Act have changed procedures and policies in public corporations. In areas such as transparency of financial records and other financial matters including compensation of top executives and conflict of interest policies affecting both corporate boards of directors and employees of the corporation the reforms of this new federal law have quickly changed corporate practices in many corporations. Many persons who have studied this new law believe that these changes will benefit the public, shareholders, employees, and other stakeholders in the modern corporation by increasing the reputation of these organizations for integrity and transparency. Stock exchanges such as NASDAQ and the New York Stock Exchange now require all listed companies to have (after a transition time) a majority of independent directors on their boards of directors. Only independent directors may serve on the audit, nominating and compensation committees of boards in most cases. Some exceptions are made to these rules for foreign and domestic issues of companies where a majority of the voting power is held by one person. According to Morrison & Foster LLP, Corporate Board Advisory March , 2004, NASDAQ requires that the board of directors of a listed company determine that an independent director does not have a relationship that would “interfere with the exercise of independent judgment” in carrying out the responsibilities of a director.