SEC Approves Stricter Independence Standards for Compensation Committee Members

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January 14, 2013

On January 11, 2013, the SEC approved Nasdaq and NYSE rule changes that implement the stricter independence standards for compensation committee members mandated by the Dodd-Frank Act. Read our earlier post on these proposals.

There are two key implementation dates for all listed companies to keep in mind:

  • July 1, 2013 – this is when the new requirements relating to the duties and authority of the compensation committee with respect to compensation advisors take effect
  • Earlier of (1) a company’s first annual meeting after January 15, 2014 or (2) October 31, 2014 – this is when the enhanced independence requirements for compensation committee members take effect

IPO companies will need to comply with the new compensation committee independence rules,subject to the same phase-in period applicable to other committee independence requirements: at least one independent member upon listing, majority of members must be independent within 90 days, and all members must be independent within one year. As a result, board and committee preparations in connection with an IPO must now factor in these new compensation committee independence requirements.

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Topic:Regulatory Developments