ICBA Responds to NASDAQ and NYSE Proposals
WWR Article - May 9, 2003
In comments to the SEC, the ICBA has urged both the NASDAQ and the NYSE to adopt more flexible corporate governance standards for small-cap companies (such as community banks) to ensure that these companies have access to the public markets and can continue to attract qualified individuals as directors.
The ICBA is particularly concerned about the proposed requirement that the majority of the board of a NYSE or NASDAQ-listed company be "independent." While generally supporting the requirement that listed-company boards include independent directors, the ICBA suggested that some accommodation be made for smaller companies (e.g. those with public floats of less than $75 million) so that those companies would only be required to have a specified percentage (but less than a majority) of their directors meet all the requirements of the proposed definition of independence. This would give some relief to smaller companies while helping to restore investor confidence.
The ICBA also urged the exchanges to modify the definition of independence so that banks and their directors (as well as the companies they are affiliated with) can continue to engage in ordinary banking activities without the concern that director independence would be impaired. Community banks frequently have difficulty finding qualified directors willing to serve on boards and committees of boards, ICBA told the SEC. Without an exemption in the definition of independence for credit transactions that comply with Regulation O or for other ordinary banking activities between a bank and a director, the number of qualified individuals available to serve on bank boards will be significantly reduced.
The ICBA also expressed concern about the NYSE requirement for regular non-management executive sessions suggesting that boards may become more divisive as a result. The ICBA also objected to cooling-off periods in situations involving family members. The rules should not presume that because a family member of a director had a relationship with the listed company two or three years ago, the director cannot act independently.