The Securities and Exchange Commission (SEC) has proposed rules that would require national securities exchanges to adopt new listing standards related to compensation committees,1 implementing certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act). New Section 10C of the Securities Exchange Act of 1934, as amended (the Exchange Act), added by Section 952 of the Dodd-Frank Act, requires the SEC to adopt rules directing the national securities exchanges to prohibit the listing of any equity security of a company that is not in compliance with Section 10C’s compensation committee and compensation adviser requirements, as described below.

The proposed rules would direct the exchanges to establish listing standards that would apply to any committee of the board of directors that oversees executive compensation, but would not require the listing standards to apply to independent directors who oversee executive compensation in lieu of a board committee. Neither the Dodd-Frank Act nor the proposed rules require a public company to establish a separate compensation committee. However, current exchange listing standards generally require listed companies to have a compensation committee or to have independent directors determine, recommend, or oversee specified executive compensation matters. As a result, most public companies have established separate compensation committees, and accordingly will be subject to these rules when they are adopted.