Companies must comply with certain final NYSE and NASDAQ listing rules by July 1.
By July 1, affected companies must comply with recent amendments to the listing rules of the New York Stock Exchange (NYSE) and the NASDAQ Stock Market (NASDAQ) relating to compensation committees. These changes, which were approved by the Securities and Exchange Commission (SEC) on January 11, 2013, were mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and the SEC's implementing regulations.
The following discusses the changes that listed companies must make by July 1, 2013, to comply with the new listing rules.
Changes Required for Compensation Committee Charters
As of July 1, the charter of each listed company's compensation committee must include the following provisions:
Neither the listing criteria nor the Dodd Frank Act prohibits the retention of a compensation adviser who may not be independent, and neither requires a compensation committee to follow the recommendations of a compensation adviser it retains.
Board Actions by NASDAQ-Listed Companies Without Compensation Committee Charters
By July 1, any NASDAQ-listed company that has independent directors who act in lieu of a compensation committee or a compensation committee that has no charter must provide such independent directors or compensation committee with the responsibilities and authority described above, either through a board resolution or other corporate action. These NASDAQ-listed companies do not have to comply with the new requirements relating to forming a compensation committee and adopting a charter until the earlier of their first annual meeting after January 15, 2014, or October 31, 2014.
The compensation committee listing rules of both the NYSE and NASDAQ have exemptions from some of the new criteria for controlled companies, smaller reporting companies and foreign private issuers, asset-backed issuers, limited partnerships, and management investment companies. Smaller reporting companies and foreign private issuers should review these exemptions to determine whether they need to amend their compensation committee charters.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis attorneys:
Thomas W. Kellerman
Amy I. Pandit