On November 26, 2013, the NASDAQ Stock Market (“Nasdaq”) filed a proposal to amend its listing standards regarding compensation committee independence (the “Proposal”). The modifications would provide Nasdaq-listed companies with greater flexibility in determining compensation committee independence by eliminating the bright line prohibition on the receipt of compensatory fees by compensation committee members. Instead, boards of directors would only be required to “consider” the receipt of such fees when determining eligibility for compensation committee membership. Overall, the Proposal brings the Nasdaq standards in line with the current New York Stock Exchange (the “NYSE”) requirements.
Pursuant to Rule 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, on June 20, 2012, the Securities and Exchange Commission (the “SEC”) issued final rules (the “Final Rules”) directing the national securities exchanges to adopt listing standards relating to the independence of compensation committees and their selection of advisors. The Final Rules provide that, at a minimum, in making an independence determination, boards must take into account (i) the source of the director’s compensation, including any consulting, advisory or other compensatory fees paid by the listed company and (ii) whether the director has an affiliate relationship with the company, a subsidiary of the company or an affiliate of a subsidiary of the company.
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