- Deadlines Approach for Implementation of NYSE And NASDAQ Compensation Committee Listing Standards
- May 9, 2013 | Author: J. Andrew Gipson
- Law Firm: Jones Walker LLP - Jackson Office
With the recent adoption of final listing standards applicable to compensation committees and compensation advisers of NYSE and NASDAQ exchange-listed companies, there are certain actions that affected companies should prepare to take.
Most aspects of the listing standards become effective on July 1, 2013. Prior to that date, companies should review the listing standards and discuss the changes with the compensation committee and the board of directors.
Also, by July 1, 2013, each affected company must consider and update its compensation committee charter so as to reflect the new charter requirements. The compensation committee charter should specify certain authorities and responsibilities of the compensation committee.
Additionally, to the extent a company utilizes or expects to utilize the services of a compensation adviser, the compensation committee is required to conduct a six-factor independence analysis prior to selection of the adviser or receipt of such advice. The independence assessment must take into consideration six specific factors previously identified in the November 1, 2012, edition of the Banking & Financial Services E*Lert.
New compensation committee member independence requirements will take effect for the company's 2014 annual meeting, but companies should begin to review these new requirements prior to that time. Prior to the earlier of the company's first annual meeting after January 15, 2014, or October 31, 2014, consideration must be given to a director's eligibility to serve on the compensation committee. Director and officer questionnaires should be updated, as well as preparation for the coming year's proxy disclosures.
The NASDAQ standards specify that a compensation committee member must "not accept directly or indirectly any consulting, advisory or other compensatory fee from the Company or any subsidiary thereof." The NYSE standards require that each board affirmatively determine the independence of committee members, specifically considering any fee payments under Section 303A.02(a)(ii).