In an interesting article in Ethikos of September 2004, Rebecca S. Walker discusses Waivers of codes of conduct and E.
Section 406 of Sarbanes-Oxley requires companies to disclose whether or not they have adopted a code of E. for senior financial officers, and if not, why not.
The SEC regulations implementing section 406 ("SEC Implementing Regulations") define a code of E. to mean written standards that are reasonably designed to deter wrongdoing and to promote:
(i) honest and ethical conduct, including the ethical handling of actual and apparent conflicts of interest;
(ii) full, fair, accurate, timely and understandable disclosure in reports and documents filed with or submitted to the SEC and in other public communications;
(iii) compliance with applicable laws, rules and regulations;
(iv) prompt internal reporting of code violations to an appropriate person; and
(v) accountability for adherence to the code.
Companies must immediately disclose any amendments of the code in a public filing with the SEC on a Form 8-K or on the company's Internet site.
On November 4, 2003, the SEC approved NYSE Rule 303A.10, including a requirement that NYSE-listed companies adopt and disclose a code of B. conduct and E. applicable to all directors, officers and employees. Any waivers of the code for directors and executive officers may be made only by the board of directors or a board committee and must be promptly disclosed to shareholders.
But, what is a waiver? The SEC Implementing Regulations defines a waiver as "the approval by the registrant of a material departure from a provision of the code of E."
The NYSE and the Nasdaq have not articulated any definition of a waiver.
According to Walker, "Given the SEC's definition of a waiver as a material departure from a provision of the code, it would seem possible to draft a code so as to avoid the need to grant a waiver under most circumstances", since "Most of the requirements for contents of codes are broad enough that language could be drafted to minimize the need to authorize a departure".