[authors: Joshua A. Agen, Jessica S. Lochmann, Patrick G. Quick]


On June 20, 2012, the Securities and Exchange Commission (SEC) adopted final rules relating to compensation committees. Some of the new rules require national securities exchanges, including the New York Stock Exchange and NASDAQ, to adopt listing standards on three topics:

  • The independence of compensation committee members, which will provide a test that will be more stringent than the test that applies to directors generally but may not be as stringent as the test that applies to audit committee members
  • A compensation committee’s authority to retain its own compensation advisers and the committee’s responsibility for the appointment, compensation, and oversight of each adviser that it retains, although the listing standards need not require a committee to retain its own advisers
  • A requirement that a compensation committee must consider specified factors that could bear on the independence of each adviser that assists the committee, whether or not the committee retained the adviser, although there is no requirement that a compensation committee only use advisers that are in fact independent in the sense that they do not present questions under any of the factors, and there is no related disclosure obligation

Another of the new rules requires companies to make additional disclosure in proxy statements about conflicts of interest relating to their use of compensation consultants, but not other compensation advisers.1