- The Washington Times - Friday, June 7, 2002

NEW YORK (AP) Companies wanting to be listed on the New York Stock Exchange or Nasdaq Stock Market would have to meet tougher accounting and governance standards under new rules proposed yesterday.

Although it could be months before any changes would take effect, the nation's two biggest stock markets wanted the public to know that they were acting to prevent future accounting debacles like the one that brought down Enron Corp.

"We still have the strongest equity markets in the world. If we're going to continue to enjoy that benefit, we have to take steps to ensure the markets are fair and efficient and there's no reason to doubt their integrity," said Ed Knight, executive vice president and general counsel at the Nasdaq. "Investors should not lack confidence in the markets and in the governance of corporate America."

Securities and Exchange Commission (SEC) Chairman Harvey L. Pitt had called for reform earlier this year. The collapse of Enron and accounting questions about several other companies, including Global Crossing and Tyco, have raised questions about whether corporate boards and outside auditors were doing their jobs. Of particular concern were the conflicts of interest in which board members benefited from policies they approved.

The separate proposals put forward yesterday by the Nasdaq and NYSE overlapped in many areas, including the need for more independent directors on corporate boards and tighter audit procedures.

But there were a few differences, particularly in the area of stock options the practice of compensating employees with shares of stock.

The NYSE wants to require shareholder approval of all stock-option plans. The Nasdaq would mandate approval for stock-option plans for officers and directors, but would exempt the requirement for rank-and-file employees' compensation packages.

Many corporations have expressed concern about the scope of the NYSE proposal, among them Business Roundtable, an association of chief executives. In a May 31 letter, the association said mandatory approval could mean fewer stock options for non-management employees, and put NYSE-listed companies at a competitive disadvantage.

The group said yesterday that it supported most of the NYSE's proposals and would work with the exchange to resolve the disagreement.

"We have heard from companies saying it might be too onerous a requirement, which is exactly why we're going to put this out for comment," NYSE Chairman Richard Grasso said at the exchange's news conference.

"In the final analysis, however, I think it's important that what we recommend have real substance to it, or the whole process will be written off."

Indeed, the rules are still in a preliminary stage and are likely to undergo revision before they are implemented. The NYSE's rules must be approved by its board, which is likely to happen in August. The SEC will have the final say.

Mr. Pitt said late yesterday that he was encouraged by the NYSE effort.

The Nasdaq submitted its proposal to the SEC yesterday but expected to expand that offering in July, when more rule changes would be released.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times is switching its third-party commenting system from Disqus to Spot.IM. You will need to either create an account with Spot.im or if you wish to use your Disqus account look under the Conversation for the link "Have a Disqus Account?". Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide