Thursday, March 31, 2011

SEC Proposes Requiring Listing Standards For Comp Committees, Comp Consultants

The composition of comp committees and matters relating to comp consultants are addressed in proposed rulemaking approved for release for public comment by the SEC yesterday. As noted in the SEC's press release and the proposed rule; the proposed rule would:
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.

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