Proposed NYSE and Nasdaq Listing Standards

October 11 2012

On September 25, 2012, both the New York Stock Exchange (“NYSE”) and the Nasdaq Stock Market LLC (“Nasdaq”) proposed changes to their respective public company listing standards with respect to the Compensation Committee and committee advisor independence requirements pursuant to Exchange Act Rule 10C-1 and Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “SEC Rules”).

Both the NYSE and Nasdaq proposed standards closely follow the SEC Rules. However, as noted in our overview below, the Nasdaq standards go beyond the SEC Rules in a number of key areas, including a prohibition against any Compensation Committee member receiving fees other than for service as a director from the company. In addition, Nasdaq proposes a number of standards, which most companies already voluntarily have in place, such as a standing Compensation Committee and adoption of a formal written Committee charter.

For a more in-depth description of the NYSE and Nasdaq Proposed Standards, please see our Client Alert.

Compensation Committee Member Independence

	NYSE Standards	Nasdaq Standards
Source of Compensation Committee Member Compensation	Other compensation does not automatically preclude independence of Compensation Committee member. Consider whether director receives compensation from any person/ entity that would impair director’s ability to independently judge the company’s executive compensation.	Compensation Committee member cannot receive any compensation from the Company or its affiliates (other than fees related to Board service).
Compensation Committee Member Affiliations	Consider whether any affiliate relationship places director under the company or senior management’s control, or creates a direct relationship between the director and senior management that would impair director’s ability to independently judge the company’s executive compensation. NYSE does not prohibit affiliates, such as owners of a company, even those with very large equity stakes, from serving on the Compensation Committee	Nasdaq does not prohibit affiliates such as owners of a company, even those with very large equity stakes, from serving on the Compensation Committee.
Non-Independent Member and Corresponding Disclosure	Not permitted, except, due to unintentional non-compliance.	If the Compensation Committee has at least three members, a director who is not independent (but who is not an employee and or Family Member) may serve as a member of the Committee for up to two years. This must be disclosed on the Company’s website or in the next annual proxy statement.
Cure Period for Unintentional Non-Compliance with Independence Requirements	Director may remain a member until the earlier of the next annual shareholders’ meeting or one year from the occurrence of the event that cause the member to no longer be independent. A member who ceases to be independent may only remain on the Compensation Committee if a majority of the Committee members are independent.	Company must regain compliance by the earlier of the next annual shareholders’ meeting or one year from the occurrence of the event that caused the member to no longer be independent; provided, however, that if the annual meeting occurs no later than 180 days following the event that caused the failure to comply, the Company shall instead have 180 days from such event to regain compliance.
Notice to the Exchange if Compensation Committee Member Ceases to be Independent	Prompt notice required	Prompt notice required

Compensation Committee Requirements

	NYSE Standards	Nasdaq Standards
Standing Committee	Already required	Compensation Committee required
Written Committee Charter	Already required	Required to have formal written charter that specifies: The scope of the Compensation Committee’s responsibilities and how it carries out these responsibilities, including structure, processes, and membership requirements; The Committee’s responsibility for determining, or recommending to the board for determination, the compensation of the CEO and other executive officers; That the CEO may not be present during voting or deliberations by the Compensation Committee on his or her compensation; and The specific responsibilities and authority required to comply with the SEC Rules regarding the ability to select and fund independent advisors, as well as the responsibility to consider independence factors in the selection of such advisors (as described in greater detail immediately below).
Minimum Number of Directors	No minimum	Minimum of 2 independent
Certify to the Exchange the Adoption of Charter	Not required	Required upon effectiveness of Nasdaq Standards
Annual Review of Compensation Committee Charter	Not required	Required upon effectiveness of Nasdaq Standards

Compensation Committee Responsibilities

	NYSE Standards	Nasdaq Standards
Evaluate Independence of Compensation Advisor	Compensation Committee may select an advisor only after considering the six factors related to independence of the advisor.	Compensation Committee may select an advisor only after considering the six factors related to independence of the advisor.
Sole Authority to Retain and Terminate Compensation Advisor	Already required	Required upon effectiveness of Nasdaq Standards
Sole Authority to Approve Compensation Advisor’s Fees	Already required	Required upon effectiveness of Nasdaq Standards
Review and approve/ recommend the CEO’s compensation level based on performance evaluation	Already required. Compensation Committee must review and approve “corporate goals and objectives relevant to CEO compensation,” and may approve the CEO’s compensation either alone or together with other independent directors.	Compensation Committee must review and approve “corporate goals and objectives relevant to CEO compensation,” and may approve the CEO’s compensation either alone or together with other independent directors. CEO may not be present during voting or deliberation on his or her compensation.
Recommend Other Executive Officer Compensation	Already required	Required upon effectiveness of Nasdaq Standards

Effective Dates

	NYSE Standards	Nasdaq Standards
Formal Adoption of Compensation Committee Roles	Already required	Required upon effectiveness of Nasdaq Standards
Compensation Committee Member Independence	The earlier of the company’s first annual meeting after January 15, 2014, or October 31, 2014	The earlier of the company’s second annual meeting after the approval date of the Standards, or December 31, 2014
Independence of Compensation Advisor	July 1, 2013	Required upon effectiveness of Nasdaq Standards
All other requirements	July 1, 2013	The earlier of the company’s second annual meeting after the approval date of the Standards, or December 31, 2014
Certify to the Exchange that Company Complied with the Amended Listing Requirements	Not required	No later than 30 days after the applicable implementation date

Additional Proxy Disclosure

	NYSE Standards	Nasdaq Standards
Disclose Any Conflict of Interest that has Arisen for Compensation Advisor	Proxy statements for annual meetings in 2013 and thereafter (requirement already effective)	Proxy statements for annual meetings in 2013 and thereafter (requirement already effective)

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