Corporate Governance Practices, Disclosure Requirements Continue to Evolve, Says Shearman & Sterling's Fifth Annual Corporate Governance Practices Survey

NEW YORK, Dec. 17 /PRNewswire/ -- U.S. public companies continue to evolve their governance practices, especially those relating to voting matters, director independence, qualifications and time commitments, related party transactions and shareholder proposals, as they now also grapple with SEC disclosure requirements around executive and director compensation, according to Shearman & Sterling's fifth annual Corporate Governance Survey of the largest US public companies.

This year's survey comes in two parts -- the fifth annual examination of general governance practices and a new annual report on executive and director compensation practices. The survey findings are primarily based on an in-depth analysis of the proxy statements of the top 100 US public companies.

"We continue to see increasingly active involvement by shareholders seeking to influence corporate strategy and direction," said John Madden, Shearman & Sterling's co-managing partner. "We are also seeing a greater role being sought by shareholders in the director election process, as well as a paring back of structural takeover defenses."

"On the executive compensation side," he added, "our survey indicates that increased disclosure continues to be both a regulatory requirement and a corporate priority."

    Key findings in this year's Corporate Governance Survey include:
    -- Between 2004 and 2006, some of the most intense shareholder pressure
       was focused on the voting standards in director elections, which has
       resulted in a dramatic increase in the number of companies using a
       majority voting standard. Fifty-six of the 100 companies surveyed this
       year now require directors to be elected by a majority of the votes
       cast rather than a plurality.
    -- As a result of continued shareholder pressure, the number of companies
       with "poison pills" and/or classified boards continues to decrease. Of
       the 100 companies surveyed this year, 17 had poison pills in place,
       compared to 33 of the companies surveyed in 2004; and 33 of the
       companies surveyed had classified boards, which represents a marked
       decrease from 54 in 2004.
    -- Standard practices regarding the disclosure of related person
       transactions have not yet emerged and, as a result, companies have
       adopted a variety of policies and procedures. Seventy-one of these
       companies disclosed at least one related person transaction, while no
       discernible standard with respect to the policies and procedures
       designed to monitor related person transactions has become predominant.
    -- Of the 22 top 100 companies at which separate individuals serve as
       chairman and CEO, only five have adopted policies requiring separation
       of the two functions.
    -- Companies requiring term limits for their directors rose steadily
       between 2004 and 2006 but dropped this year from 71 companies to 66.

On the compensation side, the Shearman & Sterling survey showed the following:

    -- There was a documented failure on the part of many companies to provide
       "analysis" in the Compensation Discussion and Analysis disclosure -
       that is, not enough disclosed information about the "how" and "why" of
       their compensation policies.
    -- Most companies provided inadequate disclosure of performance targets
       under incentive programs. Only 45 of the Top 100 Companies disclosed
       the specific targets for the performance metrics used to determine the
       annual bonuses paid to their Named Executive Officers (NEOs). Of the 55
       companies that did not disclose the specific targets for their annual
       performance bonuses, only 6 explicitly noted that the disclosure was
       omitted due to confidentiality concerns.

The survey is available on request from Shearman & Sterling's web site at www.shearman.com/corporategovernance.

Shearman & Sterling LLP is a global law firm with nearly 1,000 lawyers in 20 offices around the world. The firm is a leader in capital markets, mergers and acquisitions, project development and finance, complex business litigation, asset management, tax and international arbitration.

    Contact:
    Ron Brandsdorfer, Shearman & Sterling
    (212-848-5081 /ron.brandsdorfer@shearman.com)

    Rosemarie Yu, Edelman
    (212-642-7781 / rosemarie.yu@edelman.com)