Times certainly have changed. Many CEOs greeted corporate governance demands with choice four-letter words in recent years. So it was remarkable when, on July 21, a small cohort of America’s best-known business leaders penned their name to the “Commonsense Corporate Governance Principles,” covering topics from executive pay to board composition. Signers were careful not to label it an authoritative national code, such as those developed in nearly every other major market. But the text is as close as the United States has yet come to one. With the initiative now digested in the market, it’s time to review what the new principles got right and what’s needed to make them take root.
Our overall take is that the Commonsense Principles are heading in the right direction. They are far from comprehensive, and they wobble occasionally between pointing where companies should go, finding feeble middle ground, and simply describing practices that now prevail. Most importantly, they are silent on how to make the guidelines a living document that can make a difference. But they are a welcome first step.
