Big U.S. Companies Bolster Corporate Governance Practices, Says Shearman & Sterling's Seventh Annual Survey

Rise of majority voting, continued reduction of takeover defenses and increased transparency in executive compensation noted at 100 largest U.S. public companies

Jan 06, 2010, 14:22 ET from Shearman & Sterling LLP

NEW YORK, Jan. 6 /PRNewswire/ -- U.S. public companies are becoming increasingly more responsive to good corporate governance practices and to the interests of their shareholders, as exemplified by the rise of majority voting, continued reduction of takeover defenses and new efforts to increase transparency in executive compensation, according to global law firm Shearman & Sterling's seventh annual Corporate Governance Survey of the largest U.S. public companies.

This year's survey once again comes in two parts - the seventh annual examination of general governance practices and the third annual report on director and executive compensation practices (which was released in October). The survey findings are primarily based on an in-depth analysis of the proxy statements of the 100 largest U.S. public companies as well as, for the first time, an examination of leading institutional investors' views on certain key corporate governance topics.

"Generally speaking, corporate governance changes tend to be incremental," said John Madden, a Shearman & Sterling partner who practices in the corporate governance area and directs the annual survey, "unless key regulatory initiatives - like Sarbanes-Oxley - increase the pace. This year, with the extraordinary crisis in the financial and broader economic markets, we began to see a strong push - including through a series of legislative and regulatory initiatives - for significantly accelerated change, which I envision will have a lasting impact on companies and their boards."

Current areas of concern and focus include majority voting, proxy access, shareholder say-on-pay, broker discretionary voting authority, independent board chairs, compensation clawback policies, compensation consultant conflicts of interest, employee compensation structures and packages, enterprise risk management, declassified boards and enhancements to corporate governance-related disclosures in annual proxy statements.

Key findings in this year's Corporate Governance Survey include:

  • In the past three years, more than half of the Top 100 Companies have abandoned the plurality voting standard for director elections in favor of a majority voting standard, with 75 of the Top 100 Companies now with a majority voting standard in place. This may lead companies to spend more time and money on shareholder communications in order to help shareholders understand the importance of participating in the voting process.
  • The number of companies that have separate people serving as CEO and chairman of the board continues to rise, increasing from 28 to 31 from 2008 to 2009. While 75 of the Top 100 Companies address the topic of whether the two offices should be separated, only 7 of those companies have adopted an explicit policy of splitting the two offices. And of the Top 100 Companies, 69 still have their CEO also serving as chairman of the board.
  • With the increased complexity of board membership and decision-making, companies continue to limit the number of outside boards a director may serve on. For the second year in a row, 92 percent of companies addressed the issue of outside board membership, way up from just 76 percent in 2004.
  • In 2009, 55 of the Top 100 Companies included governance-related shareholder proposals in their proxy statements.
  • Of the Top 100 Companies, only 10 have a shareholder rights plan or "poison pill," down from 33 just five years ago.
  • E-proxy notification continues to gain in popularity. Fifty-seven of the Top 100 Companies now use an e-proxy "notice-and-access model," way up from 35 just a year ago.
  • Say-on-pay proposals were presented at 44 of the Top 100 Companies and at over 100 other US public companies. The proposals were approved at 8 of the Top 100 Companies and received majority approval at approximately 10 other US public companies.
  • The number of Top 100 Companies that publicly disclosed that they maintain a "clawback policy" has significantly increased over the last three years - 35 companies in 2007, 50 in 2008 and 56 in 2009. An additional five Top 100 Companies have disclosed that they have adopted clawback polices that became effective in 2009.

"More change is on the way, as a number of legislative and regulatory initiatives are pending further action in 2010 - many of which would have significant implications for corporate governance by giving shareholders a greater say in the governance of the public companies in which they invest," Madden said.

The survey is available on request from Shearman & Sterling's web site at

Shearman & Sterling LLP is a global law firm with approximately 900 lawyers in 19 offices in 12 countries. The firm is a leader in mergers and acquisitions, capital markets, project development and finance, complex business litigation and international arbitration, asset management and tax.

Note to editors: For a copy of the survey and related material, contact Ron Brandsdorfer at or Gaston Terrones Dimant at Edelman Public Relations at

    Ron Brandsdorfer, Shearman & Sterling
    Gaston Terrones Dimant, Edelman

SOURCE Shearman & Sterling LLP