On November 26, 2013, NASDAQ amended its independence standards
for compensation committee members to remove the outright
prohibition on compensatory fees. As revised, a board of directors
instead must consider the receipt of such fees when determining
eligibility for compensation committee membership.
In early 2013, NASDAQ adopted compensation committee independence
standards that prohibit members of the compensation committee from
directly or indirectly accepting any consulting, advisory or other
compensatory fee from the issuer or its subsidiaries, which is the
same standard applicable to audit committee members.
In order to match the more flexible rules of the New York Stock
Exchange, NASDAQ has amended its compensation committee
independence standards to remove the prohibition on the receipt of
compensatory fees by compensation committee members. Instead, the
revised rule requires that in affirmatively determining the
independence of any director who will serve on the compensation
committee, a company's board must consider the source of
compensation of the director, including any consulting, advisory or
other compensatory fee paid by the company to the director.
NASDAQ has also modified the rule to remove the carve-out from the
definition of compensatory fees for fees received by the director
as: (i) a member of the compensation committee, the board of
directors or any other board committee; and (ii) fixed amounts of
compensation under a retirement plan (including deferred
compensation) for prior service with the company. As a result,
these fees should be considered in aggregate with all other sources
of compensation of the director to determine whether such
compensation would impair the director's judgment as a member
of the compensation committee.
The implementation deadline for the new compensation committee
rules has not changed. Companies must comply with the amended rules
by the earlier of: (1) their first annual meeting after January 15,
2014; or (2) October 31, 2014. Each company must submit a one-time
certification to NASDAQ, no later than 30 days after the final
implementation deadline applicable to it, that it has complied with
the amended rules. The certification form will be available from
NASDAQ no later than January 15, 2014.
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