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Client Alert

SEC Approves NYSE and Nasdaq Independence Standards for Compensation Committees and Advisers
Authors: Susan P. Serota, Brian M. Wong, Matthew C. Ryan1

2/8/2013

New listing standards for publicly traded companies require board compensation committees composed of directors that satisfy new independence standards by the first annual meeting after January 15, 2014, or, if earlier, October 31, 2014. The listing standards also require board charters to grant compensation committees, or independent directors setting executive compensation, the power to retain their own advisers by July 1, 2013. Compensation committees, or independent directors setting executive compensation, that retain advisers must evaluate adviser conflicts of interest by July 1, 2013.

On January 11, 2013, the Securities and Exchange Commission (SEC) approved new listing requirements proposed by the New York Stock Exchange LLC (NYSE) and NASDAQ Stock Market LLC (Nasdaq) regarding executive compensation. This is the final step in the SEC’s implementation of Section 952 of the Dodd-Frank Wall Street Reform and Protection Act of 2010, which was discussed in a June 2012 Client Alert2.

Compensation Committee Requirements

For over a decade, the NYSE has required listed companies to maintain a compensation committee with the responsibility for setting executive compensation, or making recommendations to the board regarding executive compensation. For the first time, Nasdaq listing standards will mirror this requirement, necessitating a shift for companies who currently set executive compensation by a majority vote of their independent directors.

By July 1, 2013, NYSE-listed companies, and Nasdaq-listed companies with compensation committees, must update their compensation committee charters to provide such committees with the authority to hire, pay, and supervise compensation consultants, attorneys, or any other needed advisers, at company expense. Nasdaq issuers without compensation committees must form a compensation committee and committee charter with the same provisions by their first annual meeting after January 15, 2014, or, if earlier, October 31, 2014.

To read this publication in its entirety, please click the link in the adjancent "Download" section.


  1. Law clerk awaiting admission to the bar.
  2. June 28, 2012 Client Alert, SEC Adopts Independence Rules for Compensation Committees and Their Advisers.  
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