SEC Approves Stricter Independence Standards for Compensation Committee Members

SEC Approves Stricter Independence Standards for Compensation Committee Members

Blog The Road to IPO: Legal and Regulatory Insights into Going Public

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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