Recently, the NYSE and NASDAQ issued proposed rules implementing provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and SEC Rule 10C-1 governing compensation committees of listed companies. The proposed rules affect three distinct areas: 1. independence of compensation committee members, 2. independence of compensation committee consultants, legal counsel and other advisers, and 3. compensation committee charters and committee authority. The major changes in each of these areas are discussed briefly below.

As a result of the changes, NASDAQ listed companies, depending upon their current compensation committee policies and procedures, potentially face bigger changes than their NYSE counterparts. This is primarily because the NYSE rules prior to the Dodd-Frank Act were more developed and closer in line with the Dodd-Frank Act standards. Additionally, though the rules of both exchanges are subject to SEC approval, certain provisions of the NASDAQ rules are effective immediately while the NYSE’s rules are effective in 2014. Therefore, NASDAQ listed companies should be aware that time is of the essence in reacting to the new rules.