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NASDAQ and NYSE Amend Proposed Compensation Committee Independence Listing Standards
Practical Law Legal Update 3-523-5493 (Approx. 4 pages)
NASDAQ and NYSE Amend Proposed Compensation Committee Independence Listing Standards
by PLC Corporate & Securities
| Published on 14 Jan 2013 • USA (National/Federal) |
Both NASDAQ and NYSE filed further amendments to their proposed listing standards relating to the independence of compensation committees, compensation consultants and other compensation advisers.
On January 4 and January 8, 2013, respectively, NASDAQ and the NYSE filed further amendments to their proposed listing standards relating to the independence of compensation committees, compensation consultants and other compensation advisers. The proposed listing standards implement Rule 10C-1 under the Securities Exchange Act of 1934 (Exchange Act), which itself implements Section 10C of the Exchange Act, which was added by the Dodd-Frank Act.
The NASDAQ's amendments clarify that a compensation committee is not required to conduct a compensation adviser independence assessment with respect to any compensation adviser that acts in a role limited to:
- Consulting on any broad-based plan that does not discriminate in scope, terms or operation in favor of executive officers or directors and that is generally available to all salaried employees.
- Providing information that is not customized for a particular company or that is customized based on parameters that are not developed by the adviser, and about which the adviser does not provide advice.
The clarification tracks an exception to the requirement to disclose compensation consultants' role in determining or recommending the amount and form of executive and director compensation contained in Item 407(e)(3)(iii) of Regulation S-K.
NASDAQ's amendments are its second set of amendments to the proposed listing standards since its original proposal on September 25, 2012. For more information on NASDAQ's proposed standards, see Legal Updates:
The NYSE's amendments, like NASDAQ's amendments, clarify that no compensation adviser independence assessment is required with respect to advisers for whom disclosure would not be required under Item 407(e)(3)(iii) of Regulation S-K.
The NYSE's amendments also:
- Change the transition period for complying with the proposed listing standards applicable to companies exiting smaller reporting company status.
- Add commentary to the proposed standards clarifying that the standards do not preclude a compensation committee from selecting or receiving advice from a non-independent compensation adviser. Instead, the committee must consider independence factors before selecting and receiving advice from an adviser (SEC rules also require related disclosure).
The NYSE's amendments are its third set of amendments to the listing standards as originally proposed on September 25, 2012 (the first amendment made technical changes to the original proposed standards and the second was subsequently withdrawn). The NYSE amendments largely mirror those made by NASDAQ in its first or second set of amendments to the NASDAQ proposed listing standards. For more information on the NYSE proposed listing standards, see Legal Update, NYSE Proposes New Listing Standards Relating to Independence of Compensation Committees.
Both NASDAQ and the NYSE have requested that the SEC approve the proposed listing standards on an accelerated basis. The SEC had set a deadline of January 13 to act on the standards.
For more information on compensation committee requirements, see Practice Note, Corporate Governance Standards: Compensation Committee.