Compensation Committees: SEC Approves NYSE and Nasdaq Rules on Independence of Compensation Committees and Advisers; Committees Must Be Given Expanded Authority by July 1, 2013

Sullivan & Cromwell LLP - January 17, 2013

The Securities and Exchange Commission has approved the revised equity listing standards proposed by the New York Stock Exchange and the Nasdaq Stock Market regarding compensation committee and compensation adviser independence, as required by SEC rules issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act. These proposals were summarized in our publication, dated October 2, 2012, entitled “Exchanges Propose Compensation Committee Independence Standards”.

All U.S. listed companies should be aware that by July 1, 2013 boards of directors must expand the authority of their compensation committees with respect to the oversight of compensation consultants, outside legal counsel and other advisers to the committee, and effective July 1 a compensation committee may select or receive advice from an adviser only after conducting an independence assessment. In the case of NYSE-listed companies, the committee charter must reflect these additional responsibilities by the July 1 deadline; for Nasdaq companies, the committee must possess the expanded authority by that date, though technically the requirement to include the authority in a charter does not apply until the 2014 annual meeting. For both exchanges, the requirements with respect to the independence of compensation committee members will not take effect until the 2014 annual meeting.

We are preparing a more detailed publication summarizing the final listing standards, which are available on the SEC website at