Exchanges Propose Listing Standards for Compensation Committees and Compensation Adviser Independence


On September 25, 2012, the New York Stock Exchange (“NYSE”) and Nasdaq filed with the SEC proposed amendments to their listing requirements that implement the compensation committee and adviser independence provisions of Securities Exchange Act Rule 10C-1 and Section 952 of Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The proposed amendments, which do not stray far from the SEC rule, establish new standards for compensation committee member independence and the independence of compensation advisers. As discussed below, each proposal has a different effective date for the committee member requirements and the adviser independence requirements, and the two exchanges have slightly different effective dates as between one another.

Compensation Committee Composition and Independence -

Dodd-Frank and SEC Rule 10C-1 require the national securities exchanges to impose listing requirements that require each member of the listed company’s compensation committee to be independent. The exchanges may specify the factors that go into the independence determination, but at a minimum they must include consideration of the sources of a director’s compensation and whether the member is an affiliate of the listed company.

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