KMK Law Corporate & Securities Blog

Nasdaq’s proposed rules require compensation committees to consist solely of independent directors and to have at least two members, with independence based on the board’s consideration of the individual’s relationships with the company and its affiliates, and prohibit consulting, advisory or other compensatory fees from the company with limited exceptions.  Nasdaq’s proposed rules also require certain specific compensation committee charter disclosures related to that committee's responsibilities for determining or recommending CEO and other executive officer compensation.

NYSE’s proposed rules require the board of directors to consider all factors specifically relevant to determining whether a proposed compensation committee member has a relationship to the company which is material to his or her independence, including affiliate relationships with the company, the director's compensation and any consulting, advisory or other fees.  NYSE’s proposed rules also require certain specific compensation committee charter disclosures related to certain powers and responsibilities of the committee retention with respect to compensation consultants, independent legal counsel or other advisers. These advisers may be selected only after consideration all factors relevant to their independence from management, including services provided to and fees received from, the listed company by the person that employs the adviser and any relationship between the adviser and any compensation committee member or executive officer of the company.

For more on the proposed Nasdaq and NYSE rules, including their timeframe for effectiveness and certain exemptions for smaller reporting companies, please refer to KMK’s client advisory.