We digress this week, away from the benefits of SOX, to examine another important but rarely discussed topic in the corporate governance area: The structural changes taking place among the various self regulatory organizations.

This week the focus will be the NYSE.  Few can deny that the NYSE has a substantial role in corporate governance process.  See NYSE Rule 303A.  At the same time, the NYSE has undergone considerable change, including a shift from non- to for-profit status, the planned combination of much of its regulatory function with the NASD, and the approval by shareholders of the merger withEuronext, the "first integrated exchange in Europe."   The looming question is the impact of these various events on the development and enforcement of listing standards. 

The story starts in 2003, when the NYSE implemented dramatic changes in its system of corporate governance, with the center piece an independent board of directors.  Directors could not, among other things, be employed by most registered broker dealers or be executive officers of listed companies.  A discussion of the changes can be found in the adopting release.  When the Exchange converted to a for profit company in March 2006, director independence remained a centerpiece, in part to ensure that regulatory functions were properly handled.  

In December 2006, however, the NYSE sought, as part of the approval of the merger with Euronext, changes in its independence policy.  The proposing release is here.  We will explore these changes and their implications for governance in upcoming posts, particularly given the apparent immanency of SEC  sign off on the transactions.