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1. -The governance committee should solicit board nominations from shareholders, both by accepting submissions on the company’s Web site and by directly approaching the largest shareholders. 2. -The board should have at least one new board member each year. To create a vacancy, if necessary, one existing director will not be renominated. 3. -At least three-quarters of board members should have served a minimum of three years as director of a $500 million (or larger) public company. 4. -All directors except the CEO should be independent. 5. -Each board member should possess one particular skill set or expertise out of a preidentified range of specialties, such as finance, technology, marketing, or ethics. 6. -The audit committee should include at least three independent directors with at least three years of experience serving on the audit committee of a public company, comparable experience at a regulatory or standards-setting body, or experience as an auditor. The governance, compensation, and risk management committees should each consist of at least three independent directors. 7. -Each director should be paid at least $150,000 in cash per year. Directors should be required to reinvest 25 percent of their cash retainers in company stock. They should not be eligible for grants of stock options or other forms of equity. 8. -For a minimum of five years after emerging from bankruptcy, the company should be prohibited from issuing stock options to employees. 9. -The company should improve its cash-flow reporting. 10. -The company should have a formal ethics office that reports to the CEO and general counsel but is periodically reviewed by the board. 11. -Most of the company’s governance standards should be placed within thearticles of incorporations, so that they can be changed only by a shareholder vote. To read the full report, go to http://www.nysd.uscourts.gov/rulings/02cv4963_082603.pdf.

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