direc[t] the national securities exchanges to adopt certain listing standards related to the compensation committee of a company’s board of directors as well as its compensation advisers, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.Among the proposed requirements pertaining to the independence of members of a board of director's compensation commitee, as noted in the SEC's press release:
Under the SEC’s proposal, the exchanges would be required to adopt listing standards that require each member of a company’s compensation committee to be a member of the board of directors and to be independent.
In developing a definition of independence, the exchanges would be required to consider such factors as: - The sources of compensation of a director, including any consulting, advisory or compensatory fee paid by the company to such member of the board of directors. - Whether a member of the board of directors of a company is affiliated with the company, a subsidiary of the company, or an affiliate of a subsidiary of the company.
Other areas covered by the rule proposal include:
- authority and funding of the comp committee
- compensation adviser selection
- disclosure of compensation consultant conflicts.
Certain exemptions are also included in the proposal. The 30-day comment period on the SEC's rule proposal ends April 29.