Responses to ACSPC Request for Public Input
Corporate Governance/Listing Requirements
Question 22. Are the listing standards of the New York Stock Exchange, the American Stock Exchange, other exchanges or Nasdaq that require a majority of independent directors and independent audit, nominating and compensation committees (or in the alternative, in the case of Nasdaq, that nomination and executive compensation decisions at a minimum be recommended or determined by a majority of the independent directors) creating a hardship for smaller companies? Are there benefits to companies and investors of these listing standards in the context of smaller companies? Do the hardships outweigh the benefits in the case of smaller companies? If so, should these standards be revised for smaller companies, and, if so, how? In each case please explain.
a) Are smaller companies experiencing difficulty finding independent directors to satisfy these listing standards (including independent directors with the required level of financial literacy and sophistication for audit committee service)? What steps are being undertaken to meet these requirements?
The following answers have been received:
08/02/2005 13:57:44 NASDAQ requirements generally do not cause any problems for smaller or SB companies, almost none of which are listed on the Big Board.
08/02/2005 17:44:12 Once you able to get on an exchange, you should meet the requirements
08/02/2005 23:36:32 No There are benefits to this. Do not revise these standards.
08/03/2005 01:39:17 Yes. The key, I believe, is to not have the leadership of small companies be turned over to Boards of Directors. CEO's must be the decision-makers for most business decisions. However, it could be that these issues and those posed by 404 audits have become so established already, that a new method of raising equity and yet preserving the corporate leadership structure most effective, simply has to be pursued outside the US public capital markets. Committees of Board members cannot run companies effectively, and "outside" Board members are even less informed and experienced. The approaches to innovation and public company growth that worked for 100 years have not suddenly been obsoleted. However, there is little doubt that morality throughout our society has fallen over the last fifty years. Solutions like auditing are not likely to be a remedy.
08/03/2005 08:55:04 N/A at this point for our company
08/03/2005 08:58:39 We are not listed and will never be. This does not pretain to us.
08/03/2005 10:40:26 No. We have always maintained independence in these areas; it is only good business practice.
08/03/2005 12:17:58 yes. expense causes more hardship, simple. hardships outweigh the benefits.
08/03/2005 13:55:42 Pink sheet should be accorded the same as Nasdaq.
08/03/2005 15:01:40 No, The current rules are OK and prudent.
08/03/2005 15:22:49 We have complied with all the Corporate Governance/Listing requirements without too many hardships.
08/03/2005 18:01:35 Please look into item no 29
08/03/2005 18:05:44 a) It is difficult for smaller companies to find independent directors, especially with fiancial literacy and sophistication.
08/03/2005 18:30:29 x
08/03/2005 19:54:33 I have no opinion on this question.
08/03/2005 19:55:50 NO! INTEGRITY!
08/04/2005 09:39:15 There is no hardship. Quite to the contrary, we see too many audit committees and boards which are nothing more than extensions of management. In small companies there is often nobody in the board room representing the investor.
08/04/2005 10:40:16 We are not listed on any exchange but we are trying to use their standards as best practices. We have a small Board and with the committees we have, we really work them. We had a difficult time finding 3 qualifited persons for the audit committee. We have recently appointed a CPA to the board who will be on the audit committee but he still does not meet the definition of a financial expert since he has no experience in bank accounting or auditing.
08/04/2005 12:09:05 Not really. I think compensation issues are often masked in a proxy, and requiring more accountability and reporting in the 8K's is a good thing. I think the 8K rules have gone overboard and now too much of ordinary operations are having to be reported. Again, too much info takes the integrity off of the 8K process.
08/04/2005 13:38:24 Benefits outweigh the costs. The value of independent boards can never be mitigated!
08/04/2005 14:20:27 I think the current independence rules are fine.
08/04/2005 18:05:44 No Listing standards are ok.
08/05/2005 10:54:31 The indepedence requirements are needed
08/05/2005 12:38:34 NO! See item #5 above. It would appear that listing standards should at least stay the same if not be tightened.
08/05/2005 12:44:28 I have no comment.
08/05/2005 15:34:53 It is not a hardship for us.
08/05/2005 15:43:46 In the case of small banks the majority of directors have always been outside directors and regulators have pressed to assure that condition. Therefore this question is not revelant in general.
08/05/2005 16:45:38 The standrads for independence are not strict enough, and the independence of some boards is truly questionable at best and downright dishonest at worst. Most boards operate appropriately, but the influence of the dollar has proven too strong of a temptation to some to be anything more than a rubber stamp for whatever the executives do, without appropriate oversight.
08/05/2005 19:33:08 I think that in most of the cases listed above its not a problem. The main problem is that restricting the audit committee to independent directors certainly is a problem for the small entrpeneurial company. Certainly it would be benefical to everyone if one of the non-independent directors could be a member.
08/06/2005 13:52:06 Some problem finding enough qualified directors, but rules are ok.
08/08/2005 11:10:11 no. maintaining a board that is at least 51% independent and not tied to the company ensures that the investor's money will be used wisely and not just as a closely-related director sees fit. gives investors confidence that the company will be run to benefit all and not just the former owner who is now majority stockholder.
08/08/2005 14:06:10 I think the listing requirements are beneficial to smaller companies and I do not believe they impose serious harships on smaller companies. If there is a company out there that thinks these rules are onerous, then I submit to you that company should not be a public company.
08/08/2005 15:43:24 No.
08/08/2005 21:39:10 With the current cost of Director and Officer insurance, and the reluctance of independant Directors to be on the board of a company that does not have ample insurance, many small companies cannot justify the costs associated with listing on the larger exchanges.
08/09/2005 09:30:31 This may create a problem obtain board members for small companies.
08/09/2005 16:26:34 In banking, I do not take exception to these requirements.
08/09/2005 17:25:10 I believe independnet directors are important and wouldn't change anything in this regard. If we continue to place more and more burden for oversight on outside directors, we won't be able to get any "outside" persons to serve as the relative lack of pay vs. liability exposure will not be worth it.
08/10/2005 09:04:41 no comment
08/10/2005 13:44:39 We don't list, I am not familiar with this.
08/10/2005 16:00:18 No. We've always had a majority of independent directors. Independent directors have always been responsible for nominations and executive compensation, etc.
08/10/2005 17:18:15 NO - this is the cost of their voluntary inclusion in these exchanges. If companies don't like such requirements, leave the exchanges.
08/10/2005 22:09:27 I think the term "independent" is misleading. For example there are discussions by various analysts that a member of the Board should have "x" amount of stock so they have some vested interest in making sure the compny is operated correctly. If the borad member has more then 5% then it must be reported to the SEC. Does this make that Board member independent or could one conclude that that member made a decision based upon his/her investment. I think it will always be better to have more independent directors.
08/11/2005 08:35:22 No, the standards are needed, especially in smaller organizations.
08/11/2005 20:27:22 All public companies should adher to such standards. No company should be excluded from having outside directors. Smaller companies need outside directors as much as larger companies. Smaller companies with only inside managment on their board could exert too much influence at the detriment to its shareholders. If the company doesn't want outside directors, they shouldn't have gone to the public market for their financing.
08/12/2005 13:12:10 I think they are a hardship on smaller companies, but they are not unreasonable in and of themselves as public companies grow to larger size. I think they should be revised to complement and fit smaller companies recognizing that those companies don't have or attract the resources to be in compliance until they grow and command the attention of such resources.
08/12/2005 14:46:45 It may be difficult for some smaller companies to find independent directors but it is in the best interest of a company. If even in companies with independent directors, one or more directors can have an unequaled influence on Board memebers, it is critcal to have an outside voice to the shareholders.
08/12/2005 16:35:01 We are not listed on any exchange but we do have independent directos/audit committee that participate but provide no substantive benefit to investors
08/13/2005 12:39:43 Don't know
08/15/2005 13:08:27 All companies should maintain a majority of independent directors although I'd opt for looser standards for defining independence.
08/15/2005 14:27:30 So far, these standards have been more annoying than problematic and (dare I be an advocate for regulation) have in some cases resulted in a better quality of board level analysis, particularly for smaller companies. What would cause this to change for the worse in a hurry would be any success by regulators or plaintiff's lawyers in applying unfair judgments after the fact to honest attempts by directors to act properly.
08/15/2005 15:10:05 I don't think the listing requirements are hardships.
08/15/2005 15:13:01 It's certainly harder for small companies to retain good board members now that all of the litigation and SOX issues are on the front pages of the business publications. This has cased issues with the make-up of various committees - the independent committees in particular. I'm not a proponent of changing anything here because I don't know of a better solution.
08/15/2005 15:14:45 Yes, generally the Boards are smaller and it imposes a great deal more time by the board member. The benefits are the standardization. The benefits of industry knowledge may be more beneficial than the requirement for a "financial expert" on the Board, tho, if the audit firm is validating finacial reporting that is being done.
08/15/2005 16:33:43 not really- I think it was a good change to have independent directors be in charge of audit committee and compensation committee.
08/15/2005 16:41:14 No
08/15/2005 18:59:52 I think the benefits of an independet board far, far outweigh the difficulty of impelentation. What happened far too often was that the board and management were the same. No board will fire the senior for managers for underperforming when they *are* the senior managers.
08/16/2005 09:51:21 Listing requirements are fine.
08/16/2005 10:10:36 No.
08/16/2005 10:21:17 No opinion.
08/16/2005 10:26:28 not an issue although, in small companies, chairmen like to be involved in everything, they are after all small companies !
08/16/2005 10:42:02 The hardship is created by the risks borne by today's directors, which makes finding quality board members very difficult.
08/16/2005 10:44:16 I think all public companies need to be subject to same rules. Independent directors are an important part of our governace process.
08/16/2005 10:45:16 no
08/16/2005 11:18:54 We have been able to comply with the listing standards without a lot of difficulty.
08/16/2005 11:52:16 No. I believe that this is a excellent provision. It cuts the nepotism issue at the quick for small companies which were started by family members. It makes the company accept alternative view points and helps it grow. I believe this is a very good provision and should not be removed. As a matter of fact I would go further and have public companies manditorly have a nepotism policy.
08/16/2005 12:15:34 a) Yes they are. With all of the new rules involved and all of the compliance issues, I think that people are less likely to want to be on a board of directors than in the past. We have had a difficult time finding new board members.
08/16/2005 12:40:54 Yes. yes. Probably. The market has been pretty good at judging small company abuses
08/16/2005 12:42:56 No, these are not a hardship for us.
08/16/2005 13:04:14 The NASDAQ standards are fair and meaningful and I see no reason to revise them.
08/16/2005 13:12:04 I am not troubled by this; we were already "there" before SOX and we were "there" (independent directors in major majority, etc) because we belived that was just good business practice.
08/16/2005 13:19:29 These corporate governance rules have not been nearly the burden that 404 has brought. They certinaly do seem unnecessary for a small company, but they are not so overwhelmingly burdensome.
08/16/2005 13:20:23 Absolutley not. I am at a small company that complies and it has made our board and company better governed as a result. It is not a "cost" above anything else and has not added any additional hardship to our company. I would oppose different practices for smaller companies.
08/16/2005 13:25:32 The issue with smaller companies is in finding qualified outside directors for these posts, and with the time commitment of those directors, given that smaller companies don't reward outside directors very well. But smaller companies are much more apt to be founder/entrepreneur driven, therefor these areas of governance are needed more, not less. Many larger, well run companies adopted these practices before compelled to do so by regulation. The benefits to our company outweigh the hardships,where decisions effecting all stockholders must be vetted by independent directors.
08/16/2005 13:27:00 There is no burden from the listing standards.
08/16/2005 13:30:33 The listing standards are fine.
08/16/2005 14:08:05 This does not seem to be a widespread problem.
08/16/2005 14:23:10 The listing standards related to governance are not a siginficant burden. The need for independent directors is critical and the cost compared to the audit fees related to SOX 404 is insignificant. The benefit of independent oversight should add real value to investors. I do not recommend that the governance standards be changed.
08/16/2005 15:15:12 We are not a "Listed" company, so I have no knowledge of the requirements and therefore an unable to comment.
08/16/2005 16:08:50 Finding qualified people that want to serve on boards of small companies is difficult given the current regulatory/legal environment. The only negatives are that smaller companies are having to pay their independent directors larger fees and D&O Policy limits and costs are on the rise as well.
08/16/2005 16:09:47 No.
08/16/2005 16:16:04 Yes, they are creating a hardship as it is becoming difficult to attract qualified directors at an affordable level of compensation.
08/16/2005 16:45:09 The independence requirements are creating a real hardship for smaller companies in getting the required talent and paying for it. There are benefits to smaller companies for independence. However these benefits do not outweigh the costs. Large companies have not benefited from these indepedence rules. Just look at the compensation levels of top executives of some of our largest companies compared to compensation of lower levels within those companies and compensation levels in companies in other countries.
08/16/2005 18:35:41 No hardship for us. Compliance with the requirments listed here bring a small company expert resources that should be beneficial. I see no need for revision.
08/16/2005 21:29:07 These requirements do not need revision.
08/16/2005 21:40:38 a) Yes. Who wants to be a director nowadays? Too much time is spent on accounting window dressing.
08/17/2005 10:59:57 The independent standards for our company do create a hardship. we have one shareholder that has more than 50% control, management has 20% ownership and the independent directors have a very small minority intrest along with all other shareholders. The independent directors and structure has the potential to give too much influence in operations, strategey, compensation to independent directors that may or may not be aligned with the majority ownership.
08/17/2005 12:28:22 No, I don't know, no,
08/17/2005 12:36:00 I applaud the concept of independence. Smaller companies generally want smaller boards, to keep costs down if nothing else, so the practical result is that all independent directors find themselves on all three committees. It would probably be easier to designate a full board and an independent board, and assign the tasks of the audit, compensation, and nominating committees to that independent board. The one hardship I see is that the indpendence parameters should be eased to where the company is not prohibited from doing business with a director thus jeopardizing his independence. We've had the thought of whether or not we could buy a screwdriver from our director's hardware store or whether the company can advertise on a director's radio station and that director remain independent. It's also quite common for small companies to have their primary legal counsel on the board, and assuming the company does not make up a majority of that attorney's revenue, it would be very helpful if he or she could serve as one of the independent directors.
08/17/2005 12:48:33 It is costly and not always positive to get independent directors.
08/17/2005 18:49:20 The hardship is that it is more difficult for smaller companies to attract independent directors. However, if the rules are loosened as it relates to SOX for smaller companies, I think it will be harder based on higher risk.
08/17/2005 18:49:27 It is definitely harder to get the independence but it is doable, adds a lot of value to stockholders and is not expensive for teh company. It is a very good reform that was long overdue.
08/17/2005 19:31:08 Yes. The number of committees required is getting onerous. As a small company, we basically have every one of our outside directors on every committee.
08/17/2005 21:27:12 This does not present a substantial hardship.
08/17/2005 22:55:14 No there are no significant hardships to smaller companies from these requirements. Yes, there are significant benefits to investors, especially investors of smaller companies. The benfefits far outweigh the hardships, in my opinion. These standards should not be revised.
08/18/2005 08:03:31 Yes, independent directors gain full control over a company with whom have no relationship. New system can easily be abused. Prior system users as control organs of management. New system has a full control with our supervising organ. It effectively deletes a good control system.
08/18/2005 14:30:38 NO
08/19/2005 02:56:12 These requirements pose no significant problems for us. The related party rules are a bit frustrating - particularly for estranged family members. Would like to see more reality in those requirements.
08/19/2005 11:44:44 In our industry (banking) it hasn't been as big an issue, as typically we've had a majority of independent directors. It's more a matter of keeping up with all of the requirements.
08/19/2005 13:49:01 We have not experienced any difficulty recruiting qualified BOD and/or committee members thus far, however, with the additional time required and the fiduciary responsibility associated with being a member of any of these committees the Company has increased its insurance coverage and its compensation for directors. The expectation is that if an opening occurs this will help to minimize the difficulty with recruiting. However, in industry it appears that companies are experiencing difficulty in both recruiting new, qualified BOD members who are willing to accept the fiduciary responsibility that comes with the job and qualified financial experts to staff the board committees.
08/19/2005 14:40:28 No comment
08/19/2005 14:50:07 The independence requirement does place a burden on our outside board members. Along with monthly meetings which often take an entire afternoon, they each serve on several committees. As this may detract from their primary business responsibilites, it could be difficult to fill vacancies especially considering the level of board compensation and heightened personal liability.
08/19/2005 17:03:28 I haven't seen the independence rules create too much of a hardship.
08/21/2005 03:34:34 It does create hardship for smaller companies as it becomes extremely difficult to recruit such independent directors who are not interested in becoming involved with small companies. It should be revised for smaller companies - so that there is a must for independent directors but they domn't have to be the majority, and may be in some important resolutions such independent directors should be part of the majority required (like veto rights).
08/21/2005 04:46:26 Independent directors find themselves managing the company instead of the CEO and Chairman.
08/21/2005 22:19:50 No. I think the standards provide benefits that outweigh any hardships.
08/22/2005 14:21:23 Only to the extent that everyone is scared out of their wits of being a director! I am not even sure outside directors help that much. Afterall internal ones are closer to the action and have an eaiser time detecting trouble. Again "a crook is a crook" and they will find a way to hide information but it is harder when individuals are closer to the organization.
08/22/2005 15:20:23 The independent director requirement is a hardship for smaller companies. Often smaller companies have funding that comes with a board seat that may not be considered independent. This causes the company to have to hire additional directors to meet the independence standards. Board seats have become more and more expensive, especially with the implementation of SFAS 123R. I don't think the benefits of independence are significant enough to justify the hardships. Generally, the directors who are not independent have the same interests as indendent directors when it comes to financial statement accuracy, executive comp, etc. I think the standards should be relaxed for small companies to broaden the definition of independent directors. Directors who are also executives of the company should not be considered independent, but directors who have a business relationship with the company, such as an investor or joint venture partner, should be considered independent.
08/22/2005 15:47:02 No opinion.
08/22/2005 15:47:34 No.
08/22/2005 17:54:28 I don't think the current standards for corporate governance are a problem. They do create somewhat of a burden, but I think they might be positive overall.
08/22/2005 17:56:59 This area is fine
08/22/2005 19:27:18 It good to have the indepedence, but all the rules create a smaller circle of qualified directors. Just like the board has financial experts, I think you should allow some people who might be excellent board members longer-term, but might not have the intial creditenails
08/22/2005 20:10:17 Yes, definitely. It is almost impossible for a small company to have independent, non affiliated directs, audit comittee and nominating committee members. The only way to do this is to "pay" for services, and this may defeat the purpose of independence.
08/23/2005 00:42:38 these are reasonable requirements
08/23/2005 15:56:30 I think these standards are fair. They do much more to protect investors of smaller companies than SOX 404 ever will
08/23/2005 16:06:08 a) Yes, truly qualified individuals are incredibly hard to find. This is particularly true in rural areas.
08/23/2005 16:49:34 Hardships outweigh the benefits.
08/23/2005 18:10:00 not sure.
08/23/2005 21:11:03 Yes... most small companies were founded and grown by a small group of individuals. The independent director burden often creates more trouble than benefit. The nature of "financial expert" and the need for truly indpendent directors willing and qualified to be directors is an increasing burden on small companies.
08/24/2005 08:50:18 No.
08/24/2005 10:14:02 This will be an issue for us when we attempt to move from the OTCBB to small cap.
08/24/2005 12:24:07 there should be more freedom for smaller boards and management involvement for smaller companies on these issues. independence is not as important as disclosure.
08/24/2005 14:30:13 No. We've not had issues fortunately.
08/24/2005 16:19:27 Of course. With directors now having personal liabilty many of us are having a difficult time finding board members at all. The only important control is to ensure that audit comittes are not captive. Comp committes should have some outside standard or regulations to follow.
08/24/2005 16:26:56 We do not believe the listing requirements create a hardship for smaller companies. Although not due to the listing requirements, we hear and read that prospective directors are more cautious when contemplating a directorship, due to the increased time commitment required to comply with additional regulations, and the prospect of exposure of personal assets. It has become more difficult to attract as Directors individuals who are currently active in a business.
08/24/2005 16:54:47 Some but this is a good rule
08/24/2005 20:16:09 a) We are not listed.
08/25/2005 15:23:41 The independence issue is relative to any company owned by the public, therefore I do not believe it causes a hardship, however the American Stock Exchange understands that many of its companies are smaller in size and has more lenient guidelines related to Corporate Governance.
08/25/2005 16:04:36 No, if so it's probably a good thing. Yes, there are benefits of the listing standards with resepct to independent directors and financial experts. Different rules for different size companies on the same exchange is not a good idea.
08/25/2005 17:02:43 No. Yes. Yes. No.
08/26/2005 12:41:42 This has been difficult but workable for Synthetch. I can see where a small company could quickly have problems if an independent Board member were to suddenly leave. We have been carful to keep our independent board members independent, with a back-up financial expert.
08/26/2005 13:07:22 In our experience the "hardship" does not outweigh the benefits.
08/26/2005 15:31:29 Independence outweighs the costs.
08/26/2005 16:22:08 Yes.
08/26/2005 17:46:13 Smaller companies have little to offer to independent directors for the risks these people are taking on their behalf. Money resources are limited, stocks are not so liquid, profitability suffers from the costs of the SOX implementation. Yet, these companies need to recruit such directors and burden them with all the risks of the reposibilities associated with their position as independent directors. The independent directors, in turn, have limited time resources to allocate. As a result, the quality of the execution of the audit and the comp committees suffer. These hardships by far outweigh the benefits . These regulations should change.
08/27/2005 11:21:03 Yes. Obtaining that level of competence is nearly impossible for smaller companies. Of course, they already have D&O insurance because no independent director would even serve without it. More $$ in paying them is the problem. Benefits are negligible - the control persons of smaller companies are going to do and take what they're going to do and take, regardless of the opinions of such persons. So adding such persons means adding 'rubber stamp' people for compensation, not adding effective controls. Small businesses are run by entrepreneurs, not professional managers. Entrepreneurs can be coaxed into full and fair disclosures, but not into relying on such board advisors. The full and fair disclosures are almost always happening anyway. Requiring a reliance on board advisors will never happen more than such is now. Don't change the listing standards - it will just cheapen the Exchanges. Just be aware that such controls don't really operate effectively for smaller companies.
08/29/2005 07:07:37 There is no problem finding independent directors, but the burden by far outweighs the benefits. Investors in small companies look up to involvement, leadership, and ability to manage the company by major shareholders rathar than by mediocre independents.
08/29/2005 10:21:15 We are an over-the-counter bulletin board company, so some of the provisions of the NYSE, NASDAQ, etc. are not applicable. However, we do have some independent board members and particularly an independent audit committee. This measure of independence, particularly on the audit committee, seems to be a positive and appropriate aspect of SOX as it relates to publicly-traded companies.
08/29/2005 10:21:25 We are an over-the-counter bulletin board company, so some of the provisions of the NYSE, NASDAQ, etc. are not applicable. However, we do have some independent board members and particularly an independent audit committee. This measure of independence, particularly on the audit committee, seems to be a positive and appropriate aspect of SOX as it relates to publicly-traded companies.
08/29/2005 11:21:29 Listing standards need not be changed.
08/29/2005 14:18:47 I believe that it has been difficult in recent years for firms of all sizes to find qualified directors - reason being that, because of the need for more effective directors, there´s a real shortage. I believe that over time, there will be more directors available than in the current squeeze. I don´t think that corporate governance is any less important for small firms than large firms and I don´t think the standards on independent directors should be loosened for smaller firms. In fact, given that small firms are often dominated by the firm´s founder or family, independent directors are possibly more important in smaller firms than larger ones.
08/29/2005 14:53:30 Yes. Are there benefits to companies and investors of these listing standards in the context of smaller companies? I do not know of any benefits to anyone except to people who wish to be independent directors. Do the hardships outweigh the benefits in the case of smaller companies? The principal hardships are the costs and the time spent by the non-independents to get the independents to understand the business in adequate detail to make intelligent decisions. If so, should these standards be revised for smaller companies, and, if so, how? Yes, the standards should be revised. I would recommend that they be turned upside down. That is, the standard should require that a majority of the directors of small companies be dependent. Preferably with a further requirement that they have at least 20% of their personal net worth invested in the Company on which board they serve. In each case please explain. I believe that what makes small companies successful is the dedication of their leadership. This dedication results not from their extraordinary skills but from their dependency on the success of the Company to achieve their personal success.
08/29/2005 15:31:21 I feel that the biggest benefit to these requirements is the fact that they have to be disclosed, and this may be somewhat of a deterrent to fraud or other questionnable practices.
08/29/2005 16:20:53 I don't believe it is hardship although finding a director with enough financial background to serve on the audit committee can be difficult in small communities.
08/29/2005 17:09:27 The hardship for smaller companies is finding directors willing to serve who meet the independence criteria, especially for the financial expert on the audit committee.
08/29/2005 17:12:26 I think they are reasonable.
08/29/2005 17:12:43 I think the benefits of having an independent board outweigh the costs. A savvy, independent board will accomplish much of what the spirit of Sarbanes-Oxley is about.
08/29/2005 17:36:32 Due to the potential negative and legal exposure it is difficult for a small company to attract outside directors. We can't afford to pay them and they see the risk as one they are not comfortable with.
08/29/2005 19:02:32 Outside directors need to spend quite a lot of time to keep up with the operations of a business and most small companies don't pay well enough to allow them to do so. The hardship is that someone who has little knowledge of the business is making policy for the business.
08/29/2005 19:05:24 a) The perception of increased legal liability exposure combined with the bureaucratic entanglements created by SOX 404 have created an environment in which it is extraordinarily difficult to find qualified and dedicated independent directors.
08/29/2005 21:00:01 No I don't believe it does.
08/29/2005 22:40:58 It is more difficult and expensive for small companies to recruit qualified independent directors due to these listing standards and the introduction of SOX.
08/30/2005 15:04:16 Independence is a good thing. But, for small companies, the number of combinations of independent directors being on committees to assure independence is difficult to achieve - especially recognizing that - it is now harder to attract board members to small public company boards.
08/30/2005 15:07:00 I don't believe it is creating a hardship. I believe that most companies would use independent directors for at least the audit and comp committees anyway. I think the standards here are fine.
08/30/2005 17:08:46 We do not believe that the listing standards re independent directors poses a harship to smaller public companies, other than the difficulty to locate qualified directors that are willing to take on the risk in the current environment. Yes, we believe that there are benefits to companies and investors of these listing standards. The difficulty to locate qualified directors is offset by the benefits of having qualified independent directors serving on your board.
08/30/2005 18:26:14 N/A
08/30/2005 18:48:02 The NYSE, AMEX and NASDAQ listing requirements are not creating a hardship as long as the OTCBB is available as a simpler alternative. The NASDAQ Small Cap and the AMEX standards are OK as is and adequately provide the next step up from the OTCBB for growing companies.
08/30/2005 18:51:48 We believe that the listing standards of the exchanges are relevant and do not cause a hardship for smaller companies. We believe that a diverse, independent board of directors with financial expertise goes a long way in establishing an environment of control.
08/30/2005 21:07:56 No and No
08/30/2005 21:39:41 We do not believe that listing standards, such as independence of majority of Board, create an undue hardship for public companies.
08/30/2005 23:57:28 No. it will not creat hardship. It is benenfits to companies and investors.
08/31/2005 08:31:59 Yes. Its hard to find qualified candidates willing to accept the responsibility and the liability. The hardships do not outweigh the benefits.
08/31/2005 10:19:14 No, the hardships do not outweigh the benefits in the case of small publicly traded companies. The independence of the Board of Directors and the authority of these independent Borads in key areas is critical to prevent unbridled actions by executive management that can lead to public company debacles like Enron, WorldCom, HealthSouth and Tyco.
08/31/2005 10:21:37 In our case, it has not been a hardship. The independent directors provide necessary oversight, if not pressure, on management. The independent directors are more likely to ask the tough or uncomfortable questions.
08/31/2005 14:00:12 Audit Commmittes need to be independent. However, a majority of independent direcors and compensation committee doesn't seem necessary when a company has high insider ownership. If investors are buying a company with 50% insider ownership I don't believe an expectation of a majority independent Board is realistic.
08/31/2005 14:00:16 We are not having difficulty maintaining an independent board. However, I can see how directors' fees are going to rise significantly going forward in order to attract and retain qualified directors. This results in additional pressure on earnings as discussed (see my comments re SOX 404 in question #10).
08/31/2005 14:25:37 The standards for classifying a director as independent as defined by the major exchanges are completely unrealistic for small companies, such as to say that a director is not independent because he receives a fee for legal work or teaching a class.
08/31/2005 14:32:46 Doesn't apply to our operation.
08/31/2005 15:19:27 No this is a good practice that should have been in place anyway.
08/31/2005 16:13:45 A majority of directors should be independent. A majority of independent directors is preferable for committees and the financial expert but can be a hardship for smaller companies in some cases. The benefits outweigh the hardships but some allowances should be made for situations where smaller companies have unusually situations in finding qualified directors.
08/31/2005 16:16:33 22. Smaller companies may be more susceptible to fraud and other issues due to the size and less exposure of the companies compared to larger companies. It is imperative that the audit committee has a level of financial literacy and sophistication, due to the nature of the responsibilities of that committee. The audit committee has an extremely important role in the review of the financial statements and other roles as determined by their associated Board. There is a greater risk associated with independence and financial expertise among small companies, and the listing requirements help balance out this risk. These requirements do not create a burden on smaller companies. Companies are finding if difficult to attract independent directors to satisfy the listing standards. It is important for companies to recruit the right person for the job, and the compensation package should be appropriate. Companies also need to carry strong D&O insurance policies. Litigation risk is a major concern to potential candidates for these positions.
08/31/2005 16:29:59 a) Yes, another higher cost.
08/31/2005 17:16:33 No.
08/31/2005 18:22:30 Our listed clients have not found compliance with these rules to be overly difficult. In most cases the board members added to comply with the requirements have strengthened the overall oversight capabilities of the boards. In a few cases there have been realignments of directors, but most of our public clients are financial institutions which have had reasonably diverse boards for some time.
08/31/2005 18:23:08 No, listing standards are appropriate.
08/31/2005 19:16:05 22. The current rules of the exchanges and NASDAQ are putting all of the focus on independence of the Board instead of the talents of the Board or the needs of management from the Board. This is very negative. The Board is being isolated by these types of rules from the operations of the company and input from a variety of management on a routine basis. Isolation of the Board from inside participation will not lead to better diligence or properly informed decisions. In the case of our company, it has become extremely difficult to recruit new outside Board members and we just barely comply at this time.
08/31/2005 20:55:07 We are fine with the governance standards. Maybe there should be a stair step approach to number of committees and board members. This would allow a smaller company to be effective and a path for it to follow as it gets larger.
09/01/2005 00:55:31 Don't think this is a big hardship.
09/01/2005 11:40:19 a) Difficult to assess for all companies. I believe there are less candidates interested in taking a Board position in today's environment.
09/01/2005 14:30:54 The risks of being a director of a public company has increased steadily and so has the compensation required to attract directors. The handholding of directors by management has also increased. One can posit that directors are not now required to do much more than they were in the past and there is some truth to that. But, we all know that there are lawyers lurking in the background who are eager to file sometimes baseless lawsuits naming directors. This risk has made attracting directors to small companies much more difficult and expensive.
09/01/2005 17:12:34 Independence is important and sets up a very important check and balance. The issue is finding those independent directors. Some way of limiting their liability would be a good step.
09/04/2005 07:42:16 Yes. Smaller companies will usually tend to have smaller board and management. There are benefits to these standards which result from higher supervision but such supervision can be obtained in legal ways.