Significant Differences in Corporate Governance Practices for
Purposes of Section 303A.11 of the New York Stock Exchange
Listed Company Manual (the "NYSE Manual")
CNH Global N.V. is a company organized under the laws of The Netherlands and qualifies as a foreign private issuer under the NYSE listing standards. In accordance with the NYSE corporate governance rules, listed companies that are foreign private issuers are permitted to follow home-country practice in some circumstances in lieu of the provisions of the corporate governance rules contained in Section 303A of the NYSE Listed Company Manual that are applicable to U.S. companies. In addition, the NYSE Manual requires that we disclose any significant ways in which our corporate governance practices differ from those followed by U.S. companies listed on the NYSE.
Both the Dutch and NYSE corporate governance regimes were adopted with the goal of restoring trust and confidence in the honesty, integrity and transparency of how business is conducted at and by public companies. Because these corporate governance regimes are based on the same principles, they are similar in many respects. However, certain differences exist between Dutch and NYSE corporate governance rules, as summarized below. We believe that our corporate governance practices and guidelines (which were approved by our Board on March 24, 2005 and our shareholders on May 3, 2005) are consistent, in principal, with those required of U.S. companies listed on the NYSE.
The following discussion summarizes the significant differences between our corporate governance practices and the NYSE standards applicable to U.S. companies:
- Dutch legal requirements concerning director independence differ in certain respects from the rules applicable to U.S. companies listed on the NYSE. While under most circumstances both regimes require a majority of board members be "independent," the definition of this term under Dutch law differs from the definition used under the NYSE corporate governance standards. In some cases the Dutch requirement is more stringent, such as by requiring a longer "look back" period (five years) for former executive directors. In other cases, the NYSE rule is stricter. For example, directors of a Dutch company who are affiliated with a direct or indirect parent company are considered independent under Dutch law (unless the parent company is a Dutch company and is listed in a member state of the European Union), whereas the same directors are not considered independent pursuant to the NYSE rules. Accordingly, directors who are also officers of Fiat are considered independent under Dutch law unless they have been an executive officer of CNH Global N.V. within the last three years. For details concerning the independence of the members of our Board, see "Item 16G. Corporate Governance" of our Annual Report on Form 20-F, which is available on our website, www.cnh.com.
- NYSE rules require a U.S. listed company to have a compensation committee and a governance and nominating committee composed entirely of independent directors. As a foreign private issuer, we do not have to comply with this requirement, although we do have a Corporate Governance and Compensation Committee. Our Corporate Governance and Compensation Committee Charter requires that a majority of the members meet the independence requirements of the Dutch Code. For details concerning the independence of the members of this committee, see "Item 16G. Corporate Governance" of our Annual Report on Form 20-F, which is available on our website, www.cnh.com.
- In contrast to rules applicable to U. S. companies, which require that external auditors be appointed by the Audit Committee, Dutch law requires that external auditors be appointed by the shareholders. In accordance with the requirements of Dutch law, the appointment and removal of our independent registered public accounting firm must be approved by the shareholders. However, our Audit Committee is directly responsible for the recommendation to the shareholders of the appointment and compensation of the independent registered public accounting firm and oversees and evaluates the work of our independent registered public accounting firm.
- Under NYSE listing standards, shareholders of U.S. companies must be given the opportunity to vote on all equity compensation plans and to approve material revisions to those plans, with limited exceptions set forth in the NYSE rules. As a foreign private issuer we are permitted to follow our home country laws regarding shareholder approval of compensation plans, and, under Dutch law, such approval from shareholders is not required.
- While NYSE rules do not require listed companies to have shareholders approve or declare dividends, the Dutch Code Best Practices Provisions recommend shareholder approval for payments of dividends. In accordance with the Dutch Code Best Practices Provisions, annual dividends must be approved by our shareholders. For a discussion of our dividend policy, see "Item 10. Additional Information--B. Memorandum and Articles of Association--Issues Relating to Our Shares and Shareholders" of our Annual Report on Form 20-F, which is available on our website, www.cnh.com.