[authors: Todd B. Pfister, Patrick G. Quick, Aubrey V. Refuerzo]


On September 25, 2012, the NASDAQ Stock Market (Nasdaq) released a proposal (Proposal), subject to approval by the SEC, regarding independence requirements for compensation committees of Nasdaq-listed companies (Nasdaq Compensation Committees) based on the final rules that the SEC adopted June 20, 2012 (SEC Rules).1 The SEC Rules require Nasdaq, as well as other national securities exchanges, to adopt listing standards on three topics: (i) the independence of Compensation Committee members (Members); (ii) a Compensation Committee’s authority to retain its own compensation advisers; and (iii) consideration by a Compensation Committee of specified factors that could bear on the independence of compensation advisers.

Unlike the changes that the NYSE proposed,2 which largely follow the standards and requirements outlined in the SEC Rules, the changes that Nasdaq proposed go above and beyond the SEC Rules. Nasdaq’s proposed rules would, among other things: require Nasdaq-listed companies (Nasdaq Companies) to have compensation committees (as the NYSE listing standards already require); raise the independence standards for Members, in some cases applying the heightened independence standards established for audit committees; and require Nasdaq Compensation Committees to have charters establishing specified rules and standards (as the NYSE listing standards also already require). In contrast, with regard to standards for Nasdaq Compensation Committee advisers, Nasdaq proposes to adopt the standards set forth in the SEC Rules and does not propose to materially change or add to these standards.