The NYSE and the NASDAQ Stock Market (Nasdaq) recently filed additional amendments to their proposed listing standards implementing the requirements of Rule 10C-1 under the Securities Exchange Act of 1934 relating to compensation committee member independence and compensation committee advisers. Our client alerts on the NYSE's and Nasdaq's initial proposals can be found here and here, and our blog entry on an earlier amendment to Nasdaq's proposal can be found here.
The proposed listing standards would require compensation committees to consider certain independence factors before selecting a compensation consultant, legal counsel or other adviser, other than in-house legal counsel. Under the additional amendments, an independence assessment would not be required for a compensation committee adviser whose role is limited to (i) consulting on any broad-based plan that does not discriminate in scope, terms or operation, in favor of executive officers or directors of the listed company, and that is available generally to all salaried employees or (ii) providing information that either is not customized for a particular issuer or that is customized based on parameters that are not developed by the adviser, and about which the adviser does not provide advice. This exception mirrors Item 407(e)(3)(iii) of Regulation S-K, which includes an exception from disclosure for the same types of compensation committee advisers.
In addition, the NYSE amendment also (i) modifies the start date of the six-month transition period for companies graduating from smaller reporting company status, which would now commence on the date on which the company actually ceases to be a smaller reporting company, and (ii) clarifies that a compensation committee would not be precluded from selecting, or receiving advice from, a compensation committee adviser that is not independent.
As noted previously, the deadline for the SEC to take action on proposed stock exchange listing standards relating to compensation committees and their advisers is January 13, 2013.
This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.
Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.
