Directors Roster: in affiliation with Spencer Stuart--a quarterly record of new director appointments.

• Author: Porter, Martin D.
• Position: Spencer Stuart/Directors & Boards Directors Roster

THE WELL-PUBLICIZED cases of corporate malfeasance have prompted the codification of standards by each of the major exchanges to strengthen corporate governance oversight and to enhance accountability and transparency of its traded companies. Nasdaq was first to approve its governance proposals in July 2002, followed by the NYSE in August, and in September the American Stock Exchange formally approved an array of its own governance guidelines.

By taking these steps, the exchanges have emphasized the importance of board independence. They have also demonstrated an intent to strengthen the role of independent directors and the authority of audit committees.

Two executives who joined corporate boards during the most recent quarter say they doubt the NYSE proposals alone will prevent abusive practices. But they add that they believe the measures will bolster investor confidence and maintain needed checks and balances in the governance system.

Mercantile Bankshare Corp. President and CEO Edward J. Kelly III, who joins the board of NYSE-listed CSX Corp., calls the proposals a "positive development." He asserts that much of what has happened in Corporate America is "an aberration," noting that the majority of senior executives at public companies are highly ethical.

Because the proposals are aimed as much at process as they are at substance, says Kelly, they can be viewed as insurance to protect against potentially bad results. "The cost of that insurance has changed because of the nature of the shocks that have hit the market," he says, referring to the obvious need for more checks and balances in the governance system. "The proposals should have a positive effect not only in investor confidence, but also in board process, which should help companies achieve the right results."

The only shortcoming Kelly finds with the NYSE proposals is that the requirement for audit committee membership does not clarify the definition of "financial expert." "Some suggest it's someone with direct accounting experience, and others say 'extensive financial experience' should be enough to qualify," he says. "If the NYSE means 'direct accounting experience,' that may place a burden on some boards to find qualified individuals to serve on audit committees."

Boards are taking these proposals very seriously, notes Kelly, who says...