U.S. CEOs back board diversity, GAAP adherence in reform push

BOSTON (Reuters) - Leaders of top U.S. companies and investment firms on Thursday released a set of governance recommendations meant to encourage long-term economic growth, an unusual step that drew mixed reviews from advocates of deeper corporate reforms.

The executive group urged companies to maintain diverse boards, to feel free to avoid issuing earnings guidance, and to report results clearly, in keeping with generally accepted accounting principles, among other suggestions, according to a statement posted on the group’s website.

Backers of the principles included well-known chief executives Jamie Dimon of JPMorgan Chase & Co JPM.N, Jeff Immelt of General Electric Co GE.N, Larry Fink of BlackRock Inc BLK.N, Warren Buffett of Berkshire Hathaway Inc BRKa.N and Jeff Ubben of ValueAct Capital.

The statement said that while the group holds varied views on corporate governance, “we share the view that constructive dialogue requires finding common ground — a starting point to foster the economic growth that benefits shareholders, employees and the economy as a whole.”

Questions of how well companies run themselves have taken on heightened importance since the financial crisis and with the rise of shareholder activism, bringing challenges to some of the CEOs themselves. Dimon for instance has beaten back calls to split his dual role as CEO and chairman of JPMorgan’s board.

In its statement the CEO group said it began its work “to see if we could reach some consensus on what we think works in the real world.”

The comments drew some praise from the Council of Institutional Investors, whose voting members include big public-sector pension funds and endowments. Its executive director, Ken Bertsch, said in an emailed statement that the endorsement of the guidelines by the stellar executive panel “makes clear that corporate governance has entered the mainstream.”

The executives deserve credit, he said, for advocating standards including the election of corporate directors by majority vote, and calling dual-class voting - a structure in which one share class has less voting power than another - “not a best practice.”

Bertsch said the principles should have gone further on some issues, however. For instance, they do not address whether boards should act on proposals endorsed by a majority of investors.

The principles also failed to please everyone on the topics of director tenure and retirement age. Boards filled with aging members have become a touchy subject amid calls for more minorities and women to be represented. Berkshire Hathaway’s latest proxy filing, for instance, showed that five of its 12 directors were older than 80.

The principles state that companies should spell out their approach on the matters. Michael Peregrine, a corporate attorney and partner at the law firm of McDermott, Will & Emery, in an interview called the approach “a missed opportunity” since the panel could have offered more specifics to help directors make sensitive decisions on retirements.

“Many boards are clamoring for clarity, they want to do the right thing,” he said.

Editing by Phil Berlowitz and Matthew Lewis