Client Alert: SEC Finalizes Rules for Listing Standards for Compensation Committees as Required Under Dodd-Frank Act

Client Alert: SEC Finalizes Rules for Listing Standards for Compensation Committees as Required Under Dodd-Frank Act

June 22 2012

On June 20, 2012, the Securities and Exchange Commission approved new rules concerning the listing requirements for Compensation Committees, as required under Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  The final rule is little changed from the proposed rule announced in April 2011 and includes:

  • Listing Standards Regarding Compensation Committees
    • Independence of Compensation Committee Members
    • Authority and Funding of Compensation Committee
  • Listing Standards Regarding Compensation Advisor Independence
  • New Disclosure Requirements

These rules do not directly impose requirements on companies; rather they direct stock exchanges like the NYSE and NASDAQ to revise their listing standards.  New listing standards will then require SEC approval before they take effect.  Once an exchange’s new listing standards are in effect, a listed company must meet these standards in order for its shares to continue trading on that exchange.

Our View
Nothing contained in these proposed rules differs in substance or specifics from the Dodd-Frank Act or the proposal released in April 2011.

We believe independence is critical to our reputation and livelihood, and we guard it vigilantly.  We do not provide any services except those relating to executive compensation, board remuneration and related corporate governance.  When serving as advisors to a Compensation Committee, the Committee oversees all material terms of our relationships, including fee arrangements and any services to management that are separate from our service to the Committee.

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