NYSE And Nasdaq Modify Bright Line Tests For Director
Independence The New York Stock Exchange (NYSE) and the Nasdaq
Stock Market each recently modified certain bright line tests
to be used when determining director independence for purposes
of their corporate governance listing standards.
Both the NYSE and Nasdaq amended the respective bright line
direct compensation thresholds they use to determine director
independence. These thresholds have been amended such that the
level of direct compensation below which a director will remain
independent will be increased from US$100,000 annually to
US$120,000 annually, to conform with the threshold set forth in
Item 404(a) of SEC Regulation S-K.
The NYSE also amended its bright line director independence
test relating to auditor affiliation. Under the revised rule, a
director who has an immediate family member who is a current
employee of the company's auditor will be considered
independent so long as the family member does not personally
take part in the audit of the company. The existing Nasdaq rule
relating to auditor affiliation is consistent with the amended
NYSE rule.
Nasdaq received SEC approval of its proposal to increase the
direct compensation threshold on August 8, 2008. The NYSE
amendments do not require SEC approval and are applicable
beginning September 11, 2008.
Recommended Action
Companies should consider these revised bright line tests when
determining director independence for purposes of the NYSE and
Nasdaq corporate governance listing standards. In addition to
the amended tests described above, companies should consider
the other bright line tests and standards set forth by the NYSE
or Nasdaq, as applicable.
For assistance in considering questions of director
independence, or NYSE and Nasdaq listing standards in general,
please contact Frank M. Placenti, Ryan J. Kretschmer or the
Squire Sanders lawyer with whom you usually work.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.