SEC Approves Revisions to NASDAQ and NYSE Compensation Committee Rules

“The … requirements were added pursuant to the Dodd-Frank Act and:

  • enhance the independence requirements for compensation committee members;
  • specify compensation committee authority relating to compensation consultants, counsel and other advisers; and
  • specify compensation committee responsibility to consider potential conflicts of interests when selecting compensation consultants, counsel and other advisers.” (Skadden Arps)

The Securities and Exchange Commission recently approved changes to the New York Stock Exchange (NYSE) and NASDAQ requirements, addressing the independence of compensation committee members in companies listed on either exchange.

For your reference, here’s a roundup of legal commentary on the changes:

SEC Approves NYSE and NASDAQ New Compensation Committee and Adviser Listing Standards (Katten Muchin Rosenman LLP):

“In general, the listing standards require a listed company to have a compensation committee with specific responsibilities and authority to engage a compensation consultant, independent legal counsel or other advisers; to be provided sufficient funding for that purpose; and to select such compensation legal counsel or other adviser only after taking into consideration a list of enumerated independence factors.” Read on>>

SEC Approves NYSE and NASDAQ Listing Standards Applicable to Compensation Committees and Advisers (Foley & Lardner LLP):

“By no later than July 1, 2013, a U.S. NYSE-listed company must ensure that its compensation committee charter includes the required authority and responsibilities of the committee with respect to the oversight of compensation consultants, outside legal counsel, and other advisers.” Read on>>

NYSE and NASDAQ Listing Standards for Compensation Committees and Compensation Advisers Approved By SEC (Osler, Hoskin & Harcourt LLP):

“NASDAQ companies are required to implement the provisions relating to funding and authority of the compensation committee and the independence assessment of compensation committee advisers in the committee charter, resolutions or other board action by July 1, 2013… NASDAQ companies will have until the earlier of their first annual meeting after January 15, 2014, or October 31, 2014, to comply with the remaining provisions of the NASDAQ rule, including those requiring a separate compensation committee and requiring such committee to have a charter.” Read on>>

SEC Approves NYSE and Nasdaq Compensation Committee Rules (Skadden, Arps, Slate, Meagher & Flom LLP):

“In the case of committee consideration of adviser conflicts of interest, notwithstanding the July 1, 2013, effective date of the listing standards, new SEC rules … require disclosure in proxy statements for 2013 annual meetings as to whether retention of a compensation consultant raised any conflict of interest and how the conflict is being addressed. As a result, compensation committees currently should consider the listing requirements relating to adviser conflicts as they engage compensation consultants.” Read on>>

NYSE And NASDAQ Compensation Committee And Compensation Advisers Listing Standards (Pepper Hamilton LLP):

“The new NYSE and NASDAQ listing standards suggest that ownership of even a substantial amount of stock of the company by a compensation committee member may be beneficial, which is in contrast to the independence requirements for audit committee members, where material stock holdings of the company can bar a finding of independence.” Read on>>

SEC Finalizes NYSE and NASDAQ Rules Regarding Compensation Committee and Compensation Adviser Requirements (Womble Carlyle Sandridge & Rice, PLLC):

“Listed companies should review their compensation committee charters and director and officer questionnaires to confirm compliance with the final rules. Particular attention should be given to confirming the independence of each member of a company’s compensation committee in accordance with the final rules. NASDAQ listed companies that have not already done so should establish a formal compensation committee with at least two independent members by the applicable deadline.” Read on>>

SEC Approves Exchanges’ Proposed Rules for Compensation Committees and Their Advisers (Dechert LLP) :

“The new listing rules generally apply only to companies with equity securities listed on NASDAQ or the NYSE. While the specific exemption requirements vary between the two exchanges, there are several general categories of issuers that are exempt from all or a portion of the new listing rules…” Read on>>

SEC Approves New Compensation Committee and Adviser Independence Listing Standards (Morrison & Foerster LLP):

“The new NYSE and Nasdaq listing standards both generally provide a phased-in compliance period for newly listed companies. These issuers are required to have one independent compensation committee member at the time of listing, a majority of independent compensation committee members within 90 days of listing, and all independent compensation committee members within one year of listing.” Read on>>

Executive Compensation and Corporate and Securities Alert: SEC Adopts NYSE and Nasdaq Rules Relating to Compensation Committees and Compensation Consultants (Fenwick & West LLP):

“In Amendment No. 2, Nasdaq revised the proposed rules to state that the independence assessment of compensation advisers required of compensation committees does not need to be conducted for advisers whose roles are limited to those entitled to an exception from the adviser disclosure rules under Item 407(e)(3)(iii) of Regulation S-K.” Read on>>

SEC Approves Nasdaq and NYSE Listing Standards Related to Compensation Committees and Advisers (Holland & Knight LLP):

“NYSE Amendment 3 also accomplished the following: revised the transition period for companies that cease to be smaller reporting companies [and] added a statement in its commentary similar to one already found in the Nasdaq listing standards, which specifically notes that a company may select or receive advice from any compensation adviser it chooses (including advisers that are not independent), after considering the six independence factors set forth in the listing standards.” Read on>>

See also, from Leonard, Street and Deinard’s Steve Quinlivan:

Get related law news and updates on JD Supra>>