The Securities and Exchange Commission is proposing rules that will direct the New York and other national securities exchanges to adopt listing standards regarding the compensation committee of a company’s board of directors, as well as its compensation advisers.
The rules are required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In establishing the independence of each compensation committee, 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.
The SEC’s proposal also would require new disclosures from companies concerning use of compensation consultants and any conflicts of interest.
Public comments on the rule proposal should be received by April 29, 2011. The listing standards for compensation committees can be found in the SEC announcement. via Exchanges Will Be Required to Check Out Compensation Committees.