****Your answer will ONLY be used as a guide and not turned in as my work, DO NOT TAKE THIS QUESTION AND THEN FLAG IT FOR THE HONOR CODE!***

Please help with the 3 finance questions below:

-Each question only needs to be around 2-3 para graphs, no fluff just good information, but can be longer to make a point. This is not a two-ten page paper, just a question and two-three para graphs.

-Each question needs a reference and be cited (in text and correctly at the bottom). Some reading material is attached below, try to reference at least 1 of them and then you can use other resources online if you wish. Pay attention to the 2 response examples below for guidance, week 5 of the FINC 430 Sample Discussion Responses 0317.docx

Questions:

1. For the selected company, company is WALMART, and using an outline of the principal requirements of the Sarbanes-Oxley Act, cre-ate an analysis of the company's compliance and reporting activities. This analysis should be based on a careful review of the Form 10K report, proxy statement, and other information and analysis. What is your assessment of the strengths and weaknesses of the company's reporting and compliance activities?

2. Examine the selected company's corporate governance system (normally the policies and other information are available at the company's website). Evaluate the quality of the corporate governance system compared to CalPers or other standards. What are the strengths and weaknesses of the corporate governance system?What recommendations can you offer?

3. What are the most important things that you learned from the study of this week's readings and assignments? Remember to always include appropriate references.

NYSE & CalPers CORPORATE GOVERNANCE GUIDELINES NYSE Rulemaking: Corporate Governance Rules See: http://www.nyse.com/about/listed/1101074746736.html From Securities and Exchange Commission (SEC). On November 4, 2003, the SEC approved new final corporate governance rules. Highlights include: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Majority of Independent Directors - Listed companies must have a majority of independent directors. Definition of Independent Director - The definition of \"independent director\" is tightened. Meetings of Non-management Directors - To empower non-management directors to serve as a more effective check on management, the non-management directors of each company must meet at regularly scheduled executive sessions without management. Nominating / Governance Committee - Listed companies must have a nominating/corporate governance committee composed entirely of independent directors. Written Charter for Nominating / Governance Committee - The nominating/corporate governance committee must have a written charter that addresses specific rules. Independent Compensation Committee - Listed companies must have a compensation committee composed entirely of independent directors. Written Charter for Compensation Committee - The compensation committee must have a written charter that addresses specific rules Audit Committee is Required - Listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act. Audit Committee Members - The audit committee must have a minimum of three members. Audit Committee Independence - In addition to any requirement of Rule 10A-3(b) (1), all audit committee members must satisfy the requirements for independence set out in Section 303A.02. Audit Committee Charter - The audit committee must have a written charter that addresses specific rules. Governance Guidelines Disclosure - Listed companies must adopt and disclose corporate governance guidelines. Business Conduct and Ethics Standards - Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. Foreign Issuers - Listed foreign private issuers must disclose any significant ways in which their corporate governance practices differ from those followed by domestic companies under NYSE listing standards. CEO Certification of Governance Standards - (a) Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards. Notice of Noncompliance - (b) Each listed company CEO must promptly notify the NYSE in writing after any executive officer of the listed company becomes aware of any material noncompliance with any applicable provisions of this Section 303A. California Public Employees Retirement System U.S. Corporate Governance Principles See: http://www.calpers-governance.org/principles/domestic/us/page01.asp A. Board Independence & Leadership 1. A substantial majority of the board consists of directors who are independent. 2. Independent directors meet periodically (at least once a year) alone, without the CEO or other nonindependent directors. 3. When the chair of the board also serves as the company's chief executive officer, the board designates - formally or informally - an independent director who acts in a lead capacity to coordinate the other independent directors. 4. Certain board committees consist entirely of independent directors. These include the committees who perform the following functions: Audit Director Nomination Board Evaluation & Governance CEO Evaluation and Management Compensation Compliance and Ethics 5. No director may also serve as a consultant or service provider to the company. 6. Director compensation is a combination of cash and stock in the company. The stock component is a significant portion of the total compensation. B. Board Processes & Evaluation 1. The board has adopted a written statement of its own governance principles, and regularly reevaluates them. 2. With each director nomination recommendation, the board considers the mix of director characteristics, experiences, diverse perspectives and skills that is most appropriate for the company. Additionally, the board should address historically under-represented groups on the board, including women and minorities. 3. The board establishes performance criteria for itself, and periodically reviews board performance against those criteria. 4. The independent directors establish performance criteria and compensation incentives for the CEO, and regularly review the CEO's performance against those criteria. The independent directors have access to advisers on this subject, who are independent of management. Minimally, the criteria ensure that the CEO's interests are aligned with the long-term interests of shareowners, that the CEO is evaluated against comparable peer groups, and that a significant portion of the CEO's total compensation is at risk. C. Executive Compensation 1. Executive compensation programs should be designed and implemented to ensure alignment of interest with the long-term interests of shareowners. 2. Executive compensation should be comprised of a combination of cash and equity based compensation, and direct equity ownership should be encouraged. 3. Executive compensation policies should be transparent to shareowners. The policies should contain, at a minimum, compensation philosophy, the targeted mix of base compensation and "at risk" compensation, key methodologies for alignment of interest, and parameters for guidance of employment contract provisions, including severance packages. Companies should submit executive compensation policies to shareowners for approval. 4. Executive contracts should be fully disclosed, with adequate information to judge the "drivers" of incentive components of compensation packages. D. Individual Director Characteristics 1. The board has adopted guidelines that address the competing time commitments that are faced when director candidates serve on multiple boards. These guidelines are published annually in the company's proxy statement. E. Board Independence & Leadership 1. Corporate directors, managers and shareowners should come together to agree upon a uniform definition of "independence." Until this uniformity is achieved, each corporation should publish in their proxy statement the definition adopted or relied upon by its board. 2. With each director nomination recommendation, the board should consider the issue of continuing director tenure and take steps as may be appropriate to ensure that the board maintains an openness to new ideas and a willingness to critically re-examine the status quo. 3. When selecting a new chief executive officer, boards should re-examine the traditional combination of the "chief executive" and "chairman" positions. F. Board Processes & Evaluation 1. The board should have in place an effective CEO succession plan, and receive periodic reports from management on the development of other members of senior management. 2. All directors should have access to senior management. However, the CEO, chair, or independent lead director may be designated as liaison between management and directors to ensure that the role between board oversight and management operations is respected. 3. The board should periodically review its own size, and determine the size that is most effective toward future operations. G. Individual Director Characteristics 1. Each board should establish performance criteria, not only for itself (acting as a collective body) but also individual behavioral expectations for its directors. Minimally, these criteria should address the level of director: attendance, preparedness, participation, and candor. 2. To be re-nominated, directors must satisfactorily perform based on the established criteria. Renomination on any other basis should neither be expected nor guaranteed. 3. Generally, a company's retiring CEO should not continue to serve as a director on the board. 4. The board should establish and make available to shareowners the skill sets which it seeks from director candidates. Minimally, these core competencies should address: accounting or finance, international markets, business or management experience, industry knowledge, customer-base experience or perspective, crisis response, or leadership or strategic planning. H. Shareowner Rights 1. A majority of shareowners should be able to amend the company's bylaws by shareowner proposal. 2. A majority of shareowners should be able to call special meetings. 3. A majority of shareowners should be able to act by written consent. 4. Every company should prohibit greenmail. 5. No board should enact nor amend a poison pill except with shareowner approval. 6. Every director should be elected annually. 7. Proxies should be kept confidential from the company, except at the express request of shareowners. 8. Broker non-votes should be counted for quorum purposes only. 9. Any shareowner proposal that is approved by a majority of proxies cast should either be implement by the board, or the next annual proxy statement should contain a detailed explanation of the board's reasons for not implementing. 10. Shareowners should have effective access to the director nomination process. 11. All equity based compensation plans should be shareowner approved. All material changes to existing equity based compensation plans, including repricings of any form, should be shareowner approved. 12. In an uncontested director election, a majority of shareowners should be required to elect a director. In a contested election, a plurality of votes should be required to elect a director. 13. A majority of shareowners should be able to remove a director with or without cause. Sarbanes-Oxley Act of 20021 \"Congress enacted the Sarbanes-Oxley Act of 2002 to improve the reliability of public companies' financial reporting. It also wanted to restore investor confidence in independent audits following a series of financial reporting failures at Enron, WorldCom, and other large public companies in the early 2000s. Major Provisions Influencing Financial Reporting The act changed many elements in the financial reporting system used by public companies in the U.S.; for example: Sections 101, 102, 104, and 105 created the Public Company Accounting Oversight Board (PCAOB), an independent, private-sector organization supervised by the SEC. The PCAOB oversees audits of public companies by establishing technical, quality control, ethics, and independence standards for auditors of public companies and by registering, inspecting, investigating, and disciplining auditors and firms that audit those companies. Under Sections 101 and 107 of the Act, the SEC appoints PCAOB members, oversees its work, and helps enforce its rules. Sections 201, 203, 206, and 303 strengthened auditor independence requirements by prohibiting auditors from performing various non-audit services for their public company audit clients, requiring audit partners to rotate off a public company audit after working on that audit for a certain period of time, requiring \"cooling-off periods\" before certain employees of auditing firms can be hired by public company audit clients, and making it unlawful to \"improperly influence\" public companies' auditors. Sections 202 and 204 strengthened the role of public companies' audit committees by requiring them to pre-approve audit work and nonaudit services performed by companies' independent auditors. Section 301 improved communications between audit committees and their organizations' independent auditors by requiring timely, substantive reporting of information Sections 401, 406, and 407 improved financial disclosures by requiring additional information in certain SEC filings related to off- balance sheet arrangements, contractual obligations, and non-GAAP-based disclosures; by mandating that public companies adopt codes of ethics for financial managers; and by requiring audit committees to have members with financial expertise. Section 409 required that several additional types of changes in public companies' financial situations be reported in SEC filings and that all such changes be reported more quickly. Mandated Assessments of Internal Controls Perhaps the most significant financial reporting changes mandated by the Sarbanes-Oxley Act are in Section 404, which deals with public companies' internal controls and their importance in deterring fraudulent financial reporting. The Act, and subsequent rules and interpretive 1 guidance issued by the SEC and PCAOB, strengthened a requirement that public companies maintain proper financial records, supported by appropriate systems of internal control over financial reporting (ICFR). Those systems should provide reasonable assurance of the reliability of companies' financial reporting. Senior executives' and financial officers' responsibilities include the following: Annual evaluations of ICFR, including identifying and documenting financial reporting risks and developing, implementing, and documenting controls designed to mitigate those risks. Annual reporting on whether those controls are \"effective\" or \"ineffective\" (i.e., whether one or more \"material weaknesses\" exist) at the end of the year, including the control frameworks used to draw those conclusions and a discussion of any material weaknesses identified; and Communicating with audit committees and independent auditors about material weaknesses and \"significant deficiencies\" in controls that could negatively affect companies' ability to prepare financial statements and related information. Comment: The concept of \"internal control\" predates the Sarbanes-Oxley Act by many decades. The Sarbanes-Oxley Act, however, requires public companies to disclose formally management's assessments about the effectiveness of internal control over financial reporting. Moreover, the auditors of some public companies are required to attest to management's assessment of internal control. Procedures used in the assessments should take into consideration each company's unique circumstances, but they must be based on a recognized evaluation framework. Officer Certifications of Annual Reports Section 302 of the Sarbanes-Oxley Act requires CEOs and CFOs of most publicly held companies to certify, in each Form 10K filed with the SEC, that: They are responsible for establishing and maintaining ICFR; They have evaluated the effectiveness of ICFR as of the end of the period, have included their opinion about its effectiveness in the Form 10K, and have disclosed any material changes in ICFR made during the most recent fiscal quarter; They have disclosed to their companies' audit committees and independent auditors all significant deficiencies and material weaknesses in ICFR and any instances of fraud involving management or others involved in the companies' ICFR; They have reviewed the information in their companies' filings and, to the best of their knowledge, the financial statements fairly present their companies' financial condition and results of operations; The statements do not contain material omissions or misstatements; The filings comply with the requirements of the Securities Exchange Act of 1934. 2 Similarly, Section 906 requires CEOs and CFOs of public companies to certify that the annual report fully complies with applicable requirements of the Securities Exchange Act of 1934 and that information contained in the report fairly presents in all material respects the company's financial condition and results of operations. Comment: The internal control requirements in the Act, although controversial because of their high implementation cost, apparently have led to stronger controls in many areas, especially those where significant management judgment is involved. Many writers also believe that the requirements, especially those concerning management reporting on internal controls in Section 404, have helped to restore confidence in financial statements and related information. Other Ramifications As a result of the Sarbanes-Oxley Act requirements, many CEOs of publicly held companies have become more involved with their organizations' independent auditors, including having more extensive discussions about the quality of their organizations' financial reporting policies and estimates and the related controls. In addition, many publicly held companies have followed SEC recommendations to form disclosure committees composed of personnel closely involved in the financial reporting process, such as chief accounting officers, general counsels, investor relations representatives, and chief risk officers. Those committees, which typically report to senior management, oversee all aspects of companies' financial reporting functions, including assessing the materiality of information, determining how significant financial events should be accounted for, and helping to decide when those events should be disclosed. Disclosure committees may meet with CEOs and CFOs to discuss financial reporting issues and to help ensure that the executives have received all of the information they need to certify the company's financial statements. The internal control requirements of the Sarbanes-Oxley Act also have increased the involvement of many publicly held companies' audit committees with organizations' independent auditors. Section 204, for example, requires independent auditors to discuss certain specific issues with audit committees, including critical accounting policies and practices; accounting recognition, measurement, and disclosure alternatives related to material financial statement items that are acceptable under GAAP, including the impacts of using those alternatives and auditors' preferred treatment; and written communications between management and independent auditors that are material to the financial statements. Because of these new legal responsibilities, as well as new rules developed by the stock exchanges and NASDAQ, many publicly held companies' audit committees are more focused on financial reporting quality, the approach used by the company's auditors to ascertain whether the financial statements conform to GAAP, and whether the ICFR is functioning effectively. For many years, auditors have assessed internal accounting controls as part of their audits or organizations' financial statements and have discussed weaknesses in those controls with managers, boards of directors, and audit committees. Under Section 404 of the Act, however, auditors of publicly held companies are required to perform, together with financial statement audits, integrated audits assessing the design and effectiveness of organizations' ICFR. Auditors must conduct their own assessments of companies' ICFR, issue opinions as to their effectiveness, and communicate information about \"significant [control] deficiencies\" and material weaknesses\" to organizations' managements and audit committees. Managements' and auditors' assessments must be included in companies' annual reports to the SEC on Form 10-Ks.\" 3 1 From: Glazer, Alan S. and Stevens, Glenn L. Financial Statement Analysis: Qualitative Techniques. Bloomberg BNA Tax and Accounting Portfolio 5122-3rd (Accounting Policy and Practice Series). 2014. 4 2/12/2016 nysemanual.nyse.com/LCMTools/TOCChapter.asp?print=1&manual=/lcm/sections/lcmsections/chp_1_4/chp_1_4_3/default.asp&selectedNode=chp_1... 303A.00 Corporate Governance Standards 303A.00 Introduction General Application Companies listed on the Exchange must comply with certain standards regarding corporate governance as codified in this Section 303A. Consistent with the NYSE's traditional approach, as well as the requirements of the SarbanesOxley Act of 2002, certain provisions of Section 303A are applicable to some listed companies but not to others. Equity Listings Section 303A applies in full to all companies listing common equity securities, with the following exceptions: Controlled Companies A listed company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company is not required to comply with the requirements of Sections 303A.01, 303A.04 or 303A.05. Controlled companies must comply with the remaining provisions of Section 303A. Disclosure Requirement: A controlled company that chooses to take advantage of any or all of these exemptions must comply with the disclosure requirements set forth in Instruction 1 to Item 407(a) of Regulation SK. Limited Partnerships and Companies in Bankruptcy Due to their unique attributes, limited partnerships and companies in bankruptcy proceedings are not required to comply with the requirements of Sections 303A.01, 303A.04 or 303A.05. However, all limited partnerships (at the general partner level) and companies in bankruptcy proceedings must comply with the remaining provisions of Section 303A. ClosedEnd and OpenEnd Funds The Exchange considers the significantly expanded standards and requirements provided for in Section 303A to be unnecessary for closedend and openend management investment companies that are registered under the Investment Company Act of 1940, given the pervasive federal regulation applicable to them. However, closedend funds must comply with the requirements of Sections 303A.06, 303A.07(a), 303A.07(b), 303A.08 and 303A.12 with the following exceptions. A closed end fund is not required to comply with the director independence requirements of Section 303A.02 incorporated into Section 303A.07(a). A closed end fund is also not required to comply with the Disclosure Requirements in Section 303A.07(a), when a director serves on multiple boards in the same fund complex as such service will be counted as one board for purposes of Section 303A. In addition, a closedend fund is not required to make the audit committee charter required by Section 303A.07(b) available on or through its website. Business development companies, which are a type of closedend management investment company defined in Section 2(a)(48) of the Investment Company Act of 1940 that are not registered under that act, are required to comply with all of the provisions of Section 303A applicable to domestic issuers other than Section 303A.02 and the Section 303A.02 director independence requirements incorporated into 303A.07(a). For purposes of Sections 303A.01, 303A.03, 303A.04, 303A.05 and 303A.09, a director of a business development company shall be considered to be independent if he or she is not an "interested person" of the company, as defined in Section 2(a)(19) of the Investment Company Act of 1940. As required by Rule 10A3 under the Exchange Act, openend funds (which can be listed as Investment Company Units, more commonly known as Exchange Traded Funds or ETFs) are required to comply with the requirements of Sections 303A.06 and 303A.12(b) and (c). Rule 10A3(b)(3)(ii) under the Exchange Act requires that each audit committee must establish procedures for the confidential, anonymous submission by employees of the listed issuer of concerns regarding questionable accounting or auditing matters. In view of the external management structure often employed by closedend and openend funds, the Exchange also requires the audit committees of such companies to establish such procedures for the confidential, anonymous submission by employees of the investment adviser, administrator, principal underwriter, or any other provider of accounting related services for the management company, as well as employees of the management company. This responsibility must be addressed in the audit committee charter. Other Entities Except as otherwise required by Rule 10A3 under the Exchange Act (for example, with respect to openend funds), Section 303A does not apply to passive business organizations in the form of trusts (such as royalty trusts) or to derivatives and special purpose securities (such as those described in Sections 703.19 and 703.20). To the extent that Rule 10A3 applies to a passive business organization, listed derivative or special purpose security, such entities are required to comply with Sections 303A.06 and 303A.12(b). Foreign Private Issuers Listed companies that are foreign private issuers (as such term is defined in Rule 3b4 under the Exchange Act) are permitted to follow home country practice in lieu of the provisions of this Section 303A, except that such companies are required to comply with the requirements of Sections 303A.06, 303A.11 and 303A.12(b) and (c). Smaller Reporting Companies Listed companies that satisfy the definition of smaller reporting company in Exchange Act Rule 12b2 are not required to comply with Section 303A.02(a)(ii) and the second paragraph of the Commentary to Section 303A.02(a). However, smaller reporting companies must comply with all applicable requirements under Section 303A.05, with the exception of Section 303A.05(c)(iv). Preferred and Debt Listings Section 303A does not generally apply to companies listing only preferred or debt securities on the Exchange. To the extent required by Rule 10A3 under the Exchange Act, all companies listing only preferred or debt securities (including securities listed under Sections 703.21 and 703.22) on the NYSE are required to comply with the requirements of Sections 303A.06 and 303A.12(b) and (c). Transition Periods for Compensation Committee Requirements Listed companies will have until the earlier of their first annual meeting after January 15, 2014, or October 31, 2014, to comply with the new director independence standards with respect to compensation committees contained in Section 303A.02(a)(ii) and the second paragraph of the Commentary to Section 303A.02(a). Compliance Dates Companies listing on the NYSE are required to comply with all applicable requirements of Section 303A as of date that the company's securities first trade on the NYSE (the "listing date") unless otherwise provided below. A Company Listing in Conjunction with an Initial Public Offering A company will be considered to be listing in conjunction with an initial public offering as follows: For purposes of Section 303A other than Sections 303A.06 (which incorporates Exchange Act Rule 10A3 by reference) and 303A.12(b), a company will be considered to be listing in conjunction with an initial public offering if, immediately prior to listing, it does not have a class of common stock registered under the Exchange Act. For purposes of Sections 303A.06 and 303A.12(b), a company will be considered to be listing in conjunction with an initial public offering only if it meets the conditions of Rule 10A3(b)(1)(iv)(A) under the Exchange Act, namely, that the company was not, immediately prior to the effective date of a registration statement, a reporting company that was required to file reports with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act. A company listing in conjunction with its initial public offering is required to comply as follows: The company must satisfy the majority independent board requirement of Section 303A.01, if applicable, within one year of the listing date. http:/ysemanual.nyse.com/LCMTools/TOCChapter.asp?print=1&manual=/lcm/sections/lcmsections/chp_1_4/chp_1_4_3/default.asp&selectedNode=chp_1... 1/10 2/12/2016 nysemanual.nyse.com/LCMTools/TOCChapter.asp?print=1&manual=/lcm/sections/lcmsections/chp_1_4/chp_1_4_3/default.asp&selectedNode=chp_1... The company must satisfy the website posting requirements of Sections 303A.04, 303A.05, 303A.07(b), 303A.09 and 303A.10, to the extent such sections are applicable, by the earlier of the date the initial public offering closes or five business days from the listing date. The company must have at least one independent member on its nominating committee and at least one independent member on its compensation committee as required by Sections 303A.04 and 303A.05, if applicable, by the earlier of the date the initial public offering closes or five business days from the listing date, at least a majority of independent members on each committee within 90 days of the listing date and fully independent committees within one year of the listing date. The company must have at least one independent member on its audit committee that satisfies the requirements of Rule 10A3 and, if applicable, Section 303A.02, by the listing date, at least a majority of independent members within 90 days of the effective date of its registration statement and a fully independent committee within one year of the effective date of its registration statement. With respect to the requirement of Section 303A.07(a) that the audit committee must have at least three members, the company must have at least one member on its audit committee by the listing date, at least two members within 90 days of the listing date and at least three members within one year of the listing date. The company must comply with the internal audit function requirement of Section 303A.07(c) within one year of the listing date. Note: the company may include nonindependent directors on its audit committee during the phasein period if it was not required to file periodic reports with the SEC prior to listing. If it was required to file periodic reports with the SEC prior to listing, it is precluded from including nonindependent directors on its audit committee during the phasein period. A Company Listing in Conjunction with a Carveout or Spinoff Transaction The company must satisfy the majority independent board requirement of Section 303A.01, if applicable, within one year of the listing date. The company must satisfy the website posting requirements of Sections 303A.04, 303A.05, 303A.07(b), 303A.09 and 303A.10, to the extent such sections are applicable, by the date the transaction closes. The company must have at least one independent member on its nominating committee and at least one independent member on its compensation committee as required by Sections 303A.04 and 303A.05, if applicable, by the date the transaction closes, at least a majority of independent members on each committee within 90 days of the listing date and fully independent committees within one year of the listing date. The company must have at least one independent member on its audit committee that satisfies the requirements of Rule 10A3 and, if applicable, Section 303A.02, by the listing date, at least a majority of independent members within 90 days of the effective date of its registration statement and a fully independent committee within one year of the effective date of its registration statement. With respect to the requirement of Section 303A.07(a) that the audit committee must have at least three members, the company must have at least one member on its audit committee by the listing date, at least two members within 90 days of the listing date and at least three members within one year of the listing date. The company must comply with the internal audit function requirement of Section 303A.07(c) within one year of the listing date. Note: the company may include nonindependent directors on its audit committee during the phasein period if it was not required to file periodic reports with the SEC prior to listing. If it was required to file periodic reports with the SEC prior to listing, it is precluded from including nonindependent directors on its audit committee during the phasein period. A Company that Lists Upon Emergence from Bankruptcy The company must satisfy the majority independent board requirement of Section 303A.01, if applicable, within one year of the listing date. The company must satisfy the website posting requirements of Sections 303A.04, 303A.05, 303A.07(b), 303A.09 and 303A.10, to the extent such sections are applicable, by the listing date. The company must have at least one independent member on its nominating committee and at least one independent member on its compensation committee as required by Sections 303A.04 and 303A.05, if applicable, by the listing date, at least a majority of independent members on each committee within 90 days of the listing date and fully independent committees within one year of the listing date. The company must comply with the audit committee requirements of Section 303A.06 including, if applicable, the independence requirements of Section 303A.02, by the listing date unless an exemption is available pursuant to Rule 10A3. The company must comply with the threeperson audit committee requirement of Section 303A.07(a) by the listing date. A Company Previously Registered Pursuant to Section 12(b) of the Exchange Act The company must satisfy requirements of Section 303A within one year of the listing date to the extent the national securities exchange on which it was listed did not have the same requirement. If the other exchange had a substantially similar requirement and the company was afforded a transition period that had not expired, the company will have the same transition period as would have been available to it on the other exchange. The company must comply with the audit committee requirements of Section 303A.06 including, if applicable, the independence requirements of Section 303A.02, by the listing date unless an exemption is available pursuant to Rule 10A3. A Company Previously Registered Pursuant to Section 12(g) of the Exchange Act The company must satisfy the majority independent board requirement of Section 303A.01, if applicable, within one year of the listing date. The company must satisfy the website posting requirements of Sections 303A.04, 303A.05, 303A.07(b), 303A.09 and 303A.10, to the extent such sections are applicable, by the listing date. The company must have at least one independent member on its nominating committee and at least one independent member on its compensation committee as required by Sections 303A.04 and 303A.05, if applicable, by the listing date, at least a majority of independent members on each committee within 90 days of the listing date and fully independent committees within one year of the listing date. The company must comply with the audit committee requirements of Section 303A.06 including, if applicable, the independence requirements of Section 303A.02, by the listing date unless an exemption is available pursuant to Rule 10A3. With respect to the requirement of Section 303A.07(a) that the audit committee must have at least three members, the company must have at least one member on its audit committee by the listing date, at least two members within 90 days of the listing date and at least three members within one year of the listing date. A Company Ceases to Qualify as a Controlled Company To the extent a controlled company ceases to qualify as such, it is required to comply with the Section 303A domestic company requirements as follows: The company must satisfy the majority independent board requirement of Section 303A.01, if applicable, within one year of the date its status changed. The company must satisfy the website posting requirements of Sections 303A.04 and 303A.05, if applicable, by the date its status changed. The company must have at least one independent member on its nominating committee and at least one independent member on its compensation committee as required by Sections 303A.04 and 303A.05, if applicable, by the date its status changed, at least a majority of independent members on each committee within 90 days of the date its status changed and fully independent committees within one year of the date its status changed. A Company Ceases to Qualify as a Foreign Private Issuer To the extent a foreign private issuer ceases to qualify as such under SEC rules (so that it is required to file on domestic forms with the SEC), such company is required to comply with the Section 303A domestic company requirements as follows: http:/ysemanual.nyse.com/LCMTools/TOCChapter.asp?print=1&manual=/lcm/sections/lcmsections/chp_1_4/chp_1_4_3/default.asp&selectedNode=chp_1... 2/10 2/12/2016 nysemanual.nyse.com/LCMTools/TOCChapter.asp?print=1&manual=/lcm/sections/lcmsections/chp_1_4/chp_1_4_3/default.asp&selectedNode=chp_1... The company must satisfy the majority independent board requirement of Section 303A.01, if applicable, within six months of the date as of which it fails to qualify for foreign private issuer status pursuant to SEC Rule 240.3b4. Under SEC Rule 240.3b4, a company tests its status as a foreign private issuer on an annual basis at the end of its most recently completed second fiscal quarter (hereinafter, for purposes of this subsection, the "Foreign Private Issuer Determination Date"). The company must satisfy the website posting requirements of Sections 303A.04, 303A.05, 303A.07(b), 303A.09 and 303A.10, to the extent such sections are applicable, within six months of the Foreign Private Issuer Determination Date. The company must have fully independent nominating and compensation committees as required by Sections 303A.04 and 303A.05, if applicable, within six months of the Foreign Private Issuer Determination Date. The company's audit committee members must comply with the independence requirements of Section 303A.02, if applicable, within six months of the Foreign Private Issuer Determination Date. The company must comply with the threeperson audit committee requirement of Section 303A.07(a) within six months of the Foreign Private Issuer Determination Date. The company must comply with the shareholder approval requirements of Section 303A.08 by the Foreign Private Issuer Determination Date, subject to the provisions in Section 303A.08 under the heading "Ongoing Transition Period for a Foreign Private Issuer Whose Status Changes." A Company Ceases to Qualify as a Smaller Reporting Company Under Exchange Act Rule 12b2, a company tests its status as a smaller reporting company on an annual basis at the end of its most recently completed second fiscal quarter (hereinafter, for purposes of this subsection, the "Smaller Reporting Company Determination Date"). A smaller reporting company with a public float of $75 million or more as of the last business day of its second fiscal quarter will cease to be a smaller reporting company as of the beginning of the fiscal year following the Smaller Reporting Company Determination Date. The compensation committee of a company that has ceased to be a smaller reporting company shall be required to comply with Section 303A.05(c)(iv) as of six months from the date it ceases to be a smaller reporting company and must have: one member of its compensation committee that meets the independence standard of Section 303A.02(a)(ii) and the second paragraph of the commentary to Section 303A.02(a) within six months of that date a majority of directors on its compensation committee meeting those requirements within nine months of that date and a compensation committee comprised solely of members that meet those requirements within twelve months of that date. Cure Period for Compensation Committee Independence NonCompliance If a listed company fails to comply with the compensation committee composition requirements because a member of the compensation committee ceases to be independent for reasons outside the member's reasonable control, that person, with prompt notice to the Exchange and only so long as a majority of the members of the compensation committee continue to be independent, may remain a member of the compensation committee until the earlier of the next annual shareholders' meeting of the listed company or one year from the occurrence of the event that caused the member to be no longer independent. Disclosure Requirements If a listed company makes a required Section 303A disclosure in its annual proxy statement, or if the company does not file an annual proxy statement, in its annual report filed with the SEC, it may incorporate such disclosure by reference from another document that is filed with the SEC to the extent permitted by applicable SEC rules. If a listed company is not a company required to file a Form 10 K, then any provision in this Section 303A permitting a company to make a required disclosure in its annual report on Form 10K filed with the SEC shall be interpreted to mean the annual periodic disclosure form that the listed company does file with the SEC. For example, for a closedend management investment company, the appropriate form would be the annual Form NCSR. Amended: November 25, 2009 (NYSE200989) January 11, 2013 (NYSE201249) August 22, 2013 (NYSE201340). 303A.01 Independent Directors Listed companies must have a majority of independent directors. Commentary: Effective boards of directors exercise independent judgment in carrying out their responsibilities. Requiring a majority of independent directors will increase the quality of board oversight and lessen the possibility of damaging conflicts of interest. Amended: November 25, 2009 (NYSE200989). 303A.02 Independence Tests In order to tighten the definition of "independent director" for purposes of these standards: (a)(i) No director qualifies as "independent" unless the board of directors affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). (ii) In addition, in affirmatively determining the independence of any director who will serve on the compensation committee of the listed company's board of directors, the board of directors must consider all factors specifically relevant to determining whether a director has a relationship to the listed company which is material to that director's ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (A) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the listed company to such director and (B) whether such director is affiliated with the listed company, a subsidiary of the listed company or an affiliate of a subsidiary of the listed company. Commentary: It is not possible to anticipate, or explicitly to provide for, all circumstances that might signal potential conflicts of interest, or that might bear on the materiality of a director's relationship to a listed company (references to "listed company" would include any parent or subsidiary in a consolidated group with the listed company). Accordingly, it is best that boards making "independence" determinations broadly consider all relevant facts and circumstances. In particular, when assessing the materiality of a director's relationship with the listed company, the board should consider the issue not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others. However, as the concern is independence from management, the Exchange does not view ownership of even a significant amount of stock, by itself, as a bar to an independence finding. When considering the sources of a director's compensation in determining his independence for purposes of compensation committee service, the board should consider whether the director receives compensation from any person or entity that would impair his ability to make independent judgments about the listed company's executive compensation. Similarly, when considering any affiliate relationship a director has with the company, a subsidiary of the company, or an affiliate of a subsidiary of the company, in determining his independence for purposes of compensation committee service, the board should consider whether the affiliate relationship places the director under the direct or indirect control of the listed company or its senior management, or creates a direct relationship between the director and members of senior management, in each case of a nature that would impair his ability to make independent judgments about the listed company's executive compensation. Disclosure Requirement: The listed company must comply with the disclosure requirements set forth in Item 407(a) of Regulation SK. (b) In addition, a director is not independent if: (i) The director is, or has been within the last three years, an employee of the listed company, or an immediate family member is, or has been within the last three years, an executive officer, 1 of the listed company. Commentary: Employment as an interim Chairman or CEO or other executive officer shall not disqualify a director from being considered independent following that employment. http:/ysemanual.nyse.com/LCMTools/TOCChapter.asp?print=1&manual=/lcm/sections/lcmsections/chp_1_4/chp_1_4_3/default.asp&selectedNode=chp_1... 3/10 2/12/2016 nysemanual.nyse.com/LCMTools/TOCChapter.asp?print=1&manual=/lcm/sections/lcmsections/chp_1_4/chp_1_4_3/default.asp&selectedNode=chp_1... (ii) The director has received, or has an immediate family member who has received, during any twelvemonth period within the last three years, more than $120,000 in direct compensation from the listed company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service). Commentary: Compensation received by a director for former service as an interim Chairman or CEO or other executive officer need not be considered in determining independence under this test. Compensation received by an immediate family member for service as an employee of the listed company (other than an executive officer) need not be considered in determining independence under this test. (iii) (A) The director is a current partner or employee of a firm that is the listed company's internal or external auditor (B) the director has an immediate family member who is a current partner of such a firm (C) the director has an immediate family member who is a current employee of such a firm and personally works on the listed company's audit or (D) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on the listed company's audit within that time. (iv) The director or an immediate family member is, or has been with the last three years, employed as an executive officer of another company where any of the listed company's present executive officers at the same time serves or served on that company's compensation committee. (v) The director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the listed company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company's consolidated gross revenues. Commentary: In applying the test in Section 303A.02(b)(v), both the payments and the consolidated gross revenues to be measured shall be those reported in the last completed fiscal year of such other company. The lookback provision for this test applies solely to the financial relationship between the listed company and the director or immediate family member's current employer a listed company need not consider former employment of the director or immediate family member. Disclosure Requirement: Contributions to tax exempt organizations shall not be considered payments for purposes of Section 303A.02(b)(v), provided however that a listed company shall disclose either on or through its website or in its annual proxy statement, or if the listed company does not file an annual proxy statement, in the listed company's annual report on Form 10K filed with the SEC, any such contributions made by the listed company to any tax exempt organization in which any independent director serves as an executive officer if, within the preceding three years, contributions in any single fiscal year from the listed company to the organization exceeded the greater of $1 million, or 2% of such tax exempt organization's consolidated gross revenues. If this disclosure is made on or through the listed company's website, the listed company must disclose that fact in its annual proxy statement or annual report, as applicable, and provide the website address. Listed company boards are reminded of their obligations to consider the materiality of any such relationship in accordance with Section 303A.02(a) above. General Commentary to Section 303A.02(b): An "immediate family member" includes a person's spouse, parents, children, siblings, mothers and fathersinlaw, sons and daughtersinlaw, brothers and sistersinlaw, and anyone (other than domestic employees) who shares such person's home. When applying the lookback provisions in Section 303A.02(b), listed companies need not consider individuals who are no longer immediate family members as a result of legal separation or divorce, or those who have died or become incapacitated. In addition, references to the "listed company" or "company" include any parent or subsidiary in a consolidated group with the listed company or such other company as is relevant to any determination under the independent standards set forth in this Section 303A.02(b). Amended: November 25, 2009 (NYSE200989) January 11, 2013 (NYSE201249). 1 For purposes of Section 303A, the term "executive officer" has the same meaning specified for the term "officer" in Rule 16a1(f) under the Securities Exchange Act of 1934. 303A.03 Executive Sessions To empower nonmanagement directors to serve as a more effective check on management, the nonmanagement directors of each listed company must meet at regularly scheduled executive sessions without management. Commentary: To promote open discussion among the nonmanagement directors, companies must schedule regular executive sessions in which those directors meet without management participation. "Nonmanagement" directors are all those who are not executive officers, and includes such directors who are not independent by virtue of a material relationship, former status or family membership, or for any other reason. Regular scheduling of such meetings is important not only to foster better communication among nonmanagement directors, but also to prevent any negative inference from attaching to the calling of executive sessions. A nonmanagement director must preside over each executive session, although the same director is not required to preside at all executive sessions. While this Section 303A.03 refers to meetings of nonmanagement directors, listed companies may instead choose to hold regular executive sessions of independent directors only. An independent director must preside over each executive session of the independent directors, although the same director is not required to preside at all executive sessions of the independent directors. If a listed company chooses to hold regular meetings of all nonmanagement directors, such listed company should hold an executive session including only independent directors at least once a year. Disclosure Requirements: If one director is chosen to preside at all of these executive sessions, his or her name must be disclosed either on or through the listed company's website or in its annual proxy statement or, if the listed company does not file an annual proxy statement, in its annual report on Form 10K filed with the SEC. If this disclosure is made on or through the listed company's website, the listed company must disclose that fact in its annual proxy statement or annual report, as applicable, and provide the website address. Alternatively, if the same individual is not the presiding director at every meeting, a listed company must disclose the procedure by which a presiding director is selected for each executive session. For example, a listed company may wish to rotate the presiding position among the chairs of board committees. In order that all interested parties (not just shareholders) may be able to make their concerns known to the nonmanagement or independent directors, a listed company must also disclose a method for such parties to communicate directly with the presiding director or with those directors as a group either on or through the listed company's website or in its annual proxy statement or, if the listed company does not file an annual proxy statement, in its annual report on Form 10K filed with the SEC. If this disclosure is made on or through the listed company's website, the listed company must disclose that fact in its annual proxy statement or annual report, as applicable, and provide the website address. Companies may, if they wish, utilize for this purpose the same procedures they have established to comply with the requirement of Rule 10A3 (b)(3) under the Exchange Act regarding complaints to the audit committee, as applied to listed companies through Section 303A.06. Amended: November 25, 2009 (NYSE200989). 303A.04 Nominating/Corporate Governance Committee (a) Listed companies must have a nominating/corporate governance committee composed entirely of independent directors. (b) The nominating/corporate governance committee must have a written charter that addresses: (i) the committee's purpose and responsibilities which, at minimum, must be to: identify individuals qualified to become board members, consistent with criteria approved by the board, and to select, or to recommend that the board select, the director nominees for the next annual meeting of shareholders develop and recommend to the board a set of corporate governance guidelines applicable to the corporation and oversee the evaluation of the board and management and (ii) an annual performance evaluation of the committee. Commentary: A nominating/corporate governance committee is central to the effective functioning of the board. New director and board committee nominations are among a board's most important functions. Placing this responsibility in the hands of an independent nominating/corporate governance committee can enhance the independence and quality of nominees. The committee is also responsible for taking a leadership role in shaping the corporate governance of a corporation. If a listed company is legally required by contract or otherwise to provide third parties with the ability to nominate directors (for example, preferred stock rights to elect directors upon a dividend default, shareholder agreements, and management agreements), the selection and nomination of such directors need not be subject to the nominating committee process. The nominating/corporate governance committee charter should also address the following items: committee member qualifications committee member appointment and removal committee structure and operations (including authority to delegate to subcommittees) and committee reporting to the board. In addition, the charter should give the nominating/corporate governance committee sole http:/ysemanual.nyse.com/LCMTools/TOCChapter.asp?print=1&manual=/lcm/sections/lcmsections/chp_1_4/chp_1_4_3/default.asp&selectedNode=chp_1... 4/10 2/12/2016 nysemanual.nyse.com/LCMTools/TOCChapter.asp?print=1&manual=/lcm/sections/lcmsections/chp_1_4/chp_1_4_3/default.asp&selectedNode=chp_1... authority to retain and terminate any search firm to be used to identify director candidates, including sole authority to approve the search firm's fees and other retention terms. Boards may allocate the responsibilities of the nominating/corporate governance committee to committees of their own denomination, provided that the committees are composed entirely of independent directors. Any such committee must have a committee charter. Website Posting Requirement: A listed company must make its nominating/corporate governance committee charter available on or through its website. If any function of the nominating/corporate governance committee has been delegated to another committee, the charter of that committee must also be made available on or through the listed company's website. Disclosure Requirements: A listed company must disclose in its annual proxy statement or, if it does not file an annual proxy statement, in its annual report on Form 10K filed with the SEC that its nominating/corporate governance committee charter is available on or through its website and provide the website address. Amended: November 25, 2009 (NYSE200989). 303A.05 Compensation Committee (a) Listed companies must have a compensation committee composed entirely of independent directors. Compensation committee members must satisfy the additional independence requirements specific to compensation committee membership set forth in Section 303A.02(a)(ii). (b) The compensation committee must have a written charter that addresses: (i) the committee's purpose and responsibilities which, at minimum, must be to have direct responsibility to: (A) review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO's performance in light of those goals and objectives, and, either as a committee or together with the other independent directors (as directed by the board), determine and approve the CEO's compensation level based on this evaluation (B) make recommendations to the board with respect to nonCEO executive officer compensation, and incentivecompensation and equitybased plans that are subject to board approval and (C) prepare the disclosure required by Item 407(e)(5) of Regulation SK (ii) an annual performance evaluation of the compensation committee. (iii) The rights and responsibilities of the compensation committee set forth in Section 303A.05(c). Commentary: In determining the longterm incentive component of CEO compensation, the committee should consider the listed company's performance and relative shareholder return, the value of similar incentive awards to CEOs at comparable companies, and the awards given to the listed company's CEO in past years. To avoid confusion, note that the compensation committee is not precluded from approving awards (with or without ratification of the board) as may be required to comply with applicable tax laws (i.e., Rule 162(m)). Note also that nothing in Section 303A.05(b)(i)(B) is intended to preclude the board from delegating its authority over such matters to the compensation committee. The compensation committee charter should also address the following items: committee member qualifications committee member appointment and removal committee structure and operations (including authority to delegate to subcommittees) and committee reporting to the board. Boards may allocate the responsibilities of the compensation committee to committees of their own denomination, provided that the committees are composed entirely of independent directors. Any such committee must have a committee charter. Nothing in this provision should be construed as precluding discussion of CEO compensation with the board generally, as it is not the intent of this standard to impair communication among members of the board. Website Posting Requirement: A listed company must make its compensation committee charter available on or through its website. If any function of the compensation committee has been delegated to another committee, the charter of that committee must also be made available on or through the listed company's website. Disclosure Requirements: A listed company must disclose in its annual proxy statement or, if it does not file an annual proxy statement, in its annual report on Form 10K filed with the SEC that its compensation committee charter is available on or through its website and provide the website address. (c)(i) The compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser. (ii) The compensation committee shall be directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, independent legal counsel or other adviser retained by the compensation committee. (iii) The listed company must provide for appropriate funding, as determined by the compensation committee, for payment of reasonable compensation to a compensation consultant, independent legal counsel or any other adviser retained by the compensation committee. (iv) The compensation committee may select a compensation consultant, legal counsel or other adviser to the compensation committee only after taking into consideration, all factors relevant to that person's independence from management, including the following: (A) The provision of other services to the listed company by the person that employs the compensation consultant, legal counsel or other adviser (B) The amount of fees received from the listed company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser (C) The policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest (D) Any business or personal relationship of the compensation consultant, legal counsel or other adviser with a member of the compensation committee (E) Any stock of the listed company owned by the compensation consultant, legal counsel or other adviser and (F) Any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer of the listed company. Commentary: Nothing in this Section 303A.05(c) shall be construed: (A) to require the compensation committee to implement or act consistently with the advice or recommendations of the compensation consultant, independent legal counsel or other adviser to the compensation committee or (B) to affect the ability or obligation of the compensation committee to exercise its own judgment in fulfillment of the duties of the compensation committee. The compensation committee is required to conduct the independence assessment outlined in Section 303A.05(c)(iv) with respect to any compensation consultant, legal counsel or other adviser that provides advice to the compensation committee, other than (i) inhouse legal counsel and (ii) any compensation consultant, legal counsel or other adviser whose role is limited to the following activities for which no disclosure would be required under Item 407(e)(3)(iii) of Regulation SK: consulting on any broadbased plan that does not discriminate in scope, terms, or operation, in favor of executive officers or directors of the listed company, and that is available generally to all salaried employees or providing information that either is not customized for a particular company or that is customized based on parameters that are not developed by the compensation consultant, and about which the compensation consultant does not provide advice. Nothing in this Section 303A.05(c) requires a