Legal Update
Jan 7, 2013
Executive Compensation Updates: NYSE AND NASDAQ Propose Independence Standards for Compensation Committees and Consultants and ISS 2013 Proxy Guidelines
On June 20, 2012, the U.S. Securities and Exchange Commission (the “Commission”) adopted final rules to implement requirements under Section 10C of the Securities and Exchange Act of 1934 (the “Exchange Act”), established by Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”).
The new rules require (1) the national securities exchanges to adopt listing standards regarding the composition and independence of listed issuers’ compensation committees, as well as the appointment, independence, compensation and oversight of listed issuers’ compensation advisers, and (2) all issuers subject to the Commission’s proxy rules to disclose conflicts of interest relating to their use of compensation consultants.
In accordance with the Commission’s final rules, each of the New York Stock Exchange (the “NYSE”) and the NASDAQ Stock Market (“NASDAQ,” and together with the NYSE, the “Exchanges”) have proposed amendments to their listing standards to address these Dodd-Frank Act mandated requirements.
In addition to the proposed rules of the Exchanges, MSCI RiskMetrics ISS (“ISS”) has published its 2013 Policy Updates to its Corporate Governance Standards that will be effective for the 2013 proxy season. The 2013 policy updates reflect changes to ISS pay for performance methodologies relating to the consideration of peer group data and realizable pay.
This management alert summarizes the proposed NYSE and NASDAQ listing standards and the ISS 2013 Policy Updates relating to pay for performance metrics.