NASDAQ Proposes New Rules to Strengthen Corporate Governance Standards

In response to the request of Harvey L. Pitt, Chairman of the Securities and Exchange Commission, asking the Nasdaq Stock Market, Inc. and the New York Stock Exchange to review their corporate governance listing standards, Nasdaq’s board of directors approved changes to its rules relating to director independence, approval of stock option plans, and related-party transactions, among others. The adoption of the proposed rules is subject to SEC approval.

Nasdaq began submitting its proposed rules to the SEC on June 6, 2002. The proposed rules will be subject to a comment period prior to receiving any approval from the SEC. In a June 5, 2002 press release, Nasdaq chairman and chief executive officer Hardick Simmons reiterated that these are just the first in a series of proposals to revise corporate governance standards. In the coming months, Nasdaq is expected to consider making further corporate governance reforms, which may include mandating a majority of independent directors on corporate boards, expanding the scope of audit committee authority, and mandating that compensation committees, like audit committees, be composed entirely of independent directors. Nasdaq’s board of directors expects to rule on the additional proposals later this summer.

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