On January 11, 2013, the Securities and Exchange Commission (the “SEC”) approved amendments to the listing standards of each of the New York Stock Exchange (the “NYSE”) and the NASDAQ Stock Market (“Nasdaq”). The amendments implement the SEC’s final rules (the “Final Rules”) on the independence of compensation committees and their selection of advisors pursuant to Rule 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The final listing standards were adopted substantially as proposed by the exchanges in September 2012. Notable provisions in the NYSE and Nasdaq listing standards include the following:
- Nasdaq significantly enhanced its listing requirements regarding the composition of compensation committees and now will, like the NYSE, require listed companies to (i) have a standing compensation committee consisting of at least two independent directors and (ii) adopt a formal, written compensation committee charter specifying certain responsibilities and authority;
- Nasdaq partially harmonizes the compensation committee director independence criteria with those of the audit committee and therefore prohibits independent compensation committee members from accepting, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or its subsidiaries;
- The NYSE added an additional test for director independence that requires the board to consider all factors relevant to determining whether the director has a relationship that is material to the director’s ability to be independent from management; and
- Neither exchange added to the six factors the SEC identified for evaluating advisor independence.
View full memo, "SEC Approves NYSE and Nasdaq Listing Standards For Compensation Committees and Their Advisors"