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The U.S. should be careful not to restrict risk-taking and capital-market access with proposed corporate-governance reforms, according to the head of a new commission backed by NYSE Euronext (NYX) and some of the nation's largest companies.

Outrage over executive pay and risk-management issues laid bare by the financial crisis must be addressed, but new rules can't make it harder for executives to make decisions and shouldn't bog down board operations, according to Larry W. Sonsini, chairman of NYSE Euronext's Commission on Corporate Governance.

"I fear if we over-regulate risk, we will over-stagnate growth," said Sonsini, also chairman of law firm Wilson Sonsini Goodrich & Rosati.

"Right now the concern is, let's not burden corporate America with overregulation on governance principles and lose sight of the effectiveness and competitiveness we need for our companies on a global basis," Sonsini said in an interview. "Let's be sure that through this regulation we're not burdening the liquidity and transparency of our capital markets."

NYSE Euronext is fielding the group, which includes executives of Exxon-Mobil Corp. (XOM), International Business Machines Corp. (IBM), General Electric Co. (GE) and Goldman Sachs Group Inc. (GS) alongside pension-fund officials and legal experts.

The commission will add its voice to a debate that has gathered momentum in Washington and boardrooms around the country as investors seek to hold executives and boards of directors accountable for actions that, at worst, fed into the economic meltdown, or at best, look irresponsible in retrospect.

The Securities and Exchange Commission is taking aim at a variety of corporate-governance issues, and earlier this month lawmakers moved to expand the regulator's say in how board elections are carried out.

In an interview, Sonsini said that the intense focus on executive compensation will bring more transparency and increased efforts to tie pay to company performance, but shareholders' recent efforts to gain a direct say in how much senior executives get paid is "something we need to look at."

Stockholders of networking company Cisco Systems Inc. (CSCO) last week approved such a resolution, which will let them vote on executive pay every year, following similar measures taken at Apple Inc. (AAPL) and Microsoft Corp. (MSFT).

Such proposals have been pushed by activist shareholders--often big fund companies seeking changes in company policy or board makeup--which Sonsini said have also altered the way board elections are conducted, with many companies adopting majority voting for directors.

"What's happening in governance is that there's a meshing, so to speak, of stockholders and directors, and roles are starting to clash," he said. "The approach I have in mind is getting back to fundamental principles."

Advocates for corporate-governance reform have also called for board committees dedicated to risk management, another idea the NYSE Euronext commission will examine, according to Sonsini.

The commission may eventually issue recommendations to NYSE Euronext, which carries corporate-governance requirements in its listing rules. It is possible the commission also would share its findings with the SEC.

-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117; jacob.bunge@dowjones.com

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