On March 30, the Securities and Exchange Commission proposed rules directing the national securities exchanges to adopt listing standards related to the compensation committees of listed companies and their consultants and advisers, as required by Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which added Section 10C to the Securities Exchange Act of 1934. As with all listing standards, the exchanges would need the approval of the SEC prior their adoption.

Proposed Rule 10C-1(b)(i) would direct the exchanges to adopt listing standards that would require each member of a company's compensation committee, or any other committee that oversees executive compensation, to be board members and to be independent. Proposed Rule 10C-1(b)(1)(ii) would require the exchanges to develop a definition of independence after considering relevant factors, including the source of a director's compensation, any consulting, advisory or other compensatory fee paid by the issuer to such director, and whether the director is affiliated with the issuer, one of its subsidiaries, or an affiliate of a subsidiary. Proposed Rule 10C-1(a)(3) would provide that the exchanges' listing standards may provide for a cure period if a member of a compensation committee ceases to be independent for reasons that are out of such person's control. Controlled companies, limited partnerships, companies in bankruptcy proceedings, open-ended management investment companies registered under the Investment Company Act of 1940 and any foreign private issuer that discloses in its annual report the reasons that it does not have an independent compensation committee would each be exempted from the compensation committee independence listing standards under proposed Rule 10C-1(b)(iii).