Over the past several years, the New York Stock Exchange (the "NYSE") has refined its corporate governance standards for listed companies. At the same time, the NYSE has recognized that a foreign company that maintains its status under U.S. securities laws as a "foreign private issuer" is permitted to follow its home country practice in lieu of many of the provisions of the new NYSE standards. Accordingly, as a foreign private issuer, MI Developments Inc. ("MID") is only required to comply with the following NYSE corporate governance listing standards:
1. MID must maintain an audit committee that satisfies the audit committee rules and independence standards of the U.S. Securities and Exchange Commission;
2. MID must provide a brief description of any significant ways in which its corporate governance practices differ from those followed by United States companies that are subject to the NYSE listing standards;
3. MID's Chief Executive Officer must promptly notify the NYSE in writing after an executive officer of MID becomes aware of any material non-compliance with the applicable NYSE corporate governance listing standards; and
4. MID must submit an executed written affirmation annually to the NYSE and must submit interim written affirmations each time a change occurs to the Board of Directors or any of its committees that are subject to the corporate governance standards. The written affirmations relate to compliance with applicable NYSE corporate governance listing standards.
MID complies with all of the mandatory listing standards that apply to it as a foreign private issuer. Furthermore, although MID's Chief Executive Officer does not have to certify to the NYSE each year that he is not aware of any violations of the NYSE corporate governance listing standards, as is required for U.S. companies, MID does provide the summary information contained herein to highlight any significant differences between MID's corporate governance practices and those applicable to U.S. companies.
In addition to being exempt from certain of the NYSE standards due to its foreign private issuer status, as a "controlled company" MID is also exempt (as are U.S. companies that are "controlled") from the NYSE requirements that:
1. A majority of MID's directors be "independent";
2. MID comply with the nominating/corporate governance committee listing standards, including that such committee be comprised entirely of independent directors; and
3. MID comply with the compensation committee listing standards, including that such committee be comprised entirely of independent directors.
Notwithstanding MID's status as a foreign private issuer and as a controlled company, MID currently complies with many of the NYSE corporate governance standards from which it is exempt, including:
1. A majority of the members of MID's Board of Directors are independent, as that term is defined by the NYSE governance standards in relation to boards of directors;
2. The non-management independent directors of MID meet at regularly scheduled executive sessions without management present;
3. MID's Audit Committee must be comprised of at least three members and all of the members of the Committee are independent, as that term is defined by the NYSE governance standards applicable to audit committees;
4. The Audit Committee has adopted a written charter that addresses the Committee's purpose, duties and responsibilities; and
5. MID has adopted and disclosed a code of business conduct and ethics for all of its directors,
officers and employees.
In addition, MID is currently undertaking an ongoing assessment of its system of internal control over financial reporting.
MID is subject to the rules of the Toronto Stock Exchange (the "TSX") that require, subject to certain exceptions, shareholder approval for security-based compensation arrangements. The TSX rules are similar to the NYSE rules that require shareholder approval of equity compensation plans and MID believes that its compliance with the TSX rules provides shareholders with the appropriate level of oversight in relation to such compensation arrangements.
Notwithstanding the NYSE standards, MID does not have a formal internal audit function and has chosen to have a single Corporate Governance and Compensation Committee (a majority of the members of which are independent according to the NYSE standards applicable to both corporate governance and compensation committees) perform the functions of both a nominating/corporate governance committee and a compensation committee. These deviations from the NYSE requirements are expressly permitted due to MID's status as a foreign private issuer and, in relation to the nominating committee, also as a result of MID's status as a controlled company. MID believes that the nomination of directors can be effectively dealt with by (1) the Board (and, in particular, its non-management directors) due to its relatively small size, and (2) the Corporate Governance and Compensation Committee. The Corporate Governance and Compensation Committee has adopted and disclosed a written charter that substantially addresses the charter requirements of the NYSE standards.
Each year in its Management Information Circular/Proxy Statement, MID reviews its existing corporate governance practices with specific reference to the existing guidelines of Canadian National Policy 58-201 -- Corporate Governance Guidelines. This information is also made available on MID's website. In so doing, MID believes that it satisfies in all material respects the NYSE's requirement that companies adopt and disclose corporate governance guidelines.
