CEMEX and the NYSE
Section 303A.11 of the New York Stock Exchange ("NYSE") Listed Company Manual ("LCM"), requires that listed foreign private issuers, such as CEMEX, S.A.B. de C.V. ("CEMEX"), must disclose any significant ways in which their corporate governance practices differ from those followed by U.S. companies under NYSE listing standards.
CEMEX is incorporated as a stock corporation with variable capital organized under the laws of the United Mexican States ("Mexico"). Its shares are listed on both the NYSE and the Mexican Stock Exchange ("MSE"). CEMEX is an operating and holding company engaged, directly or indirectly, through its operating subsidiaries, primarily in the production, distribution, marketing and sale of cement, ready-mix concrete, aggregates, clinker and other construction materials throughout the world.
CEMEX's corporate governance practices are governed by its by-laws, by the corporate governance provisions set forth in the Ley del Mercado de Valores (the "Mexican Securities Market Law"), the Circular de Emisoras (the "Mexican Regulation for Issuers") issued by the Comisión Nacional Bancaria y de Valores (the "Mexican Banking and Securities Commission") and the Reglamento Interior de la Bolsa Mexicana de Valores (the "Mexican Stock Exchange Rules") (the Mexican Securities Market Law, the Mexican Regulation for Issuers and the Mexican Stock Exchange Rules, collectively the "Mexican Laws and Regulations"), and by applicable U.S. securities laws. CEMEX is also subject to the rules of the NYSE (the "NYSE Rules") to the extent they apply to foreign private issuers. Except for those specific rules, foreign private issuers are permitted to follow home country practice in lieu of the provisions of Section 303A of the LCM.
CEMEX, on a voluntary basis, also complies with the Código de Mejores Prácticas Corporativas (the "Mexican Code of Best Corporate Practices") as indicated below, which was promulgated by a committee established by the Consejo Coordinador Empresarial ("Mexican Corporate Coordination Board"). The Mexican Corporate Coordination Board provides recommendations for better corporate governance practices for listed companies in Mexico, and the Mexican Code of Best Corporate Practices has been endorsed by the Mexican Banking and Securities Commission.
In order to comply with Section 303A.11 of the LCM, the following is a summary of significant ways in which our corporate governance practices differ from those required to be followed by U.S. domestic companies under the NYSE's listing standards.
| NYSE Listing Standards | CEMEX Corporate Governance Practice |
|---|---|
| 303A.01 Listed companies must have a majority of independent directors. |
Pursuant to the Mexican Securities Market Law, we are required to have a board of directors with a maximum of 21 members, 25% of whom must be independent. Determination as to the independence of our directors is made upon their election by our shareholders at the corresponding meeting. Currently, our Board of Directors has 15 members, of which more than 25% are independent under the Mexican Securities Market Law. The Mexican Securities Market Law sets forth, in article 26, the definition of “independence”, which differs from the one set forth in Section 303A.02 of the LCM. Generally, under the Mexican Securities Market Law, a director is not independent if such director is an employee or officer of the company or its subsidiaries; an individual that has significant influence over the company or its subsidiaries; a shareholder that is part of a group that controls the company; or, if there exist certain relationships between a company and a director, entities with which the director is associated or family members of the director. |
| 303A.03 Non-management directors must meet at regularly executive sessions without management. |
Under our by-laws and the Mexican Laws and Regulations, our non-management and independent directors are not required to meet in executive sessions. Our Board of Directors must meet at least once every three months. |
| 303A.04 Listed companies must have a nominating/corporate governance committee composed of independent directors. |
Under our by-laws and the Mexican Laws and Regulations, we are not required to have a nominating committee. We do not have such committee. Our Corporate Practices and Finance Committee operates pursuant to the provisions of the Mexican Securities Market Law and our by-laws. Our Corporate Practices and Finance Committee is composed of four independent directors. It is responsible for evaluating the performance of our executive officers; reviewing related party transactions; reviewing the compensation paid to executive officers; evaluating any waivers granted to directors or executive officers for their taking of corporate opportunities; and carrying out the activities described in the Mexican laws. Our Corporate Practices and Finance Committee meets as required by our by-laws and Mexican laws and regulations. |
| 303A.05 Listed companies must have a compensation committee composed of independent directors. |
Under our by-laws and Mexican laws and regulations, we are not required to have a compensation committee, and we do not have such committee. |
| 303A.06 Listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act. |
Our Audit Committee operates pursuant to the provisions of the Mexican Securities Market Law and our by-laws. Our Audit Committee is composed of four members. According to applicable law and our by-laws, all of the members of the Audit Committee must be independent directors. Our Audit Committee is responsible for evaluating the company’s internal controls and procedures, identifying any material deficiencies it finds; following up with any corrective or preventive measures adopted with respect to the non-compliance with the operation and accounting guidelines and policies; evaluating the performance of the external auditors; describing and valuating those non-audit services rendered by the external auditor; reviewing the company’s financial statements; assessing the effects of any modifications to the accounting policies approved during a fiscal year; overseeing measures adopted as result of any observations made by shareholders, directors, executive officers, employees or any third parties with respect to accounting, internal controls and internal and external audit, as well as any complaints regarding irregularities on management, including anonymous and confidential methods for addressing concerns raised by employees; assuring the execution of resolutions adopted at shareholders’ or board of directors’ meetings. Our Board of Directors has determined that it has an "audit committee financial expert", for purposes of the Sarbanes-Oxley Act of 2002, serving on its Audit Committee. Our Audit Committee meets as required by our by-laws and Mexican laws and regulations. |
| 303A.09 Listed companies must adopt and disclose corporate governance guidelines. |
Under our by-laws and the Mexican Laws and Regulations, we are not required to adopt corporate governance guidelines, but, on an annual basis, we file a report with the Bolsa Mexicana de Valores (the "Mexican Stock Exchange") regarding our compliance with the Mexican Code of Best Corporate Practices. |
| 303A.10 Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. |
We have adopted a written code of ethics that applies to all of our employees, including our principal executive officer, principal financial officer and principal accounting officer. You may request a copy of our code of ethics, at no cost, by writing to or telephoning us as follows: CEMEX, S.A.B. de C.V. |
| Equity compensation plans Equity compensation plans require shareholder approval, subject to limited exemptions. |
Shareholder approval is not expressly required under our by-laws for the adoption and amendment of an equity compensation plan. However, on our annual shareholders meeting held on February 23, 2012, our shareholders resolved to extend our current Stock Program for our Employees, Officers and Administrators up to December 31, 2018. |