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A Checklist for the New NASDAQ Compensation Committee Rules

The linked article is a detailed list of the requirements for establishing a compensation committee and for the independence of its members, as required by NASDAQ rules.

NYSE and NASDAQ Amend Compensation Committee Proposals

"NASDAQ proposes to clarify that a compensation committee is not required to conduct the independence assessment required by proposed Listing Rule 5605(d)(3)(D) with respect to a compensation adviser that acts in a role limited to: consulting on any broad-based plan ... and/or providing [certain] information ... The NYSE has proposed a similar amendment to its proposal, together with amendments addressing transition when smaller reporting companies are no longer eligible for that status."

ISS Releases 2013 Policy Updates

"Acknowledging the comments received during ISS' 2012 comment period, ISS will be taking a case-by-case approach in determining whether pledging rises to a level of serious concern for shareholders. Also in response to comments, ISS is including significant pledging of company stock as a failure of risk oversight and thus considered a governance failure whereby directors should be held accountable.... Realizable pay is being added to the research report for large capitalization companies."

ISS Publishes FAQs on New Peer Group Selection Method

"ISS has published a series of frequently asked questions on its new peer group selection method. The FAQs explain the new policies. The new procedures give weight in some circumstances to an issuer's self-selected peers. The FAQS therefore provide issuers with an opportunity to advise ISS of any changes in its peer group for consideration by ISS."

California Superior Court Dismisses Say-on-Pay Case

"The court found: None of the compensation-related information was rendered materially misleading by omission of information about the financial performance of Symantec or the other companies in the peer group. It was not substantially likely that disclosure of the comparative TSR information would have significantly altered the total mix of information available to the Symantec shareholders. The proxy adequately disclosed what the pay targets were based on, as well as the fact that compensation may be above the positioning benchmark based on consideration of factors other than performance." [Gordon v. Symantec, No. 1-12-CV-231541 (Cal. Super. Ct. for Santa Clara Cty. Aug. 2, 2013)]

PCAOB, Auditors and Executive Compensation

"Some commenters objected to the initial proposal on the grounds that auditors might influence the design of compensation programs or require the auditor to substantively judge the executive compensation programs. The [Public Company Accounting Oversight Board] thinks it solved these problems by emphasizing that the purpose of the procedures is to further the auditor's risk assessment of material misstatement rather than to determine the appropriateness of executive compensation."

NASDAQ Amends Compensation Committee Proposal

"While the substance of the proposal did not change too much, the transition requirements did, and became more workable.... In order to allow companies to make necessary adjustments to their boards and committees in the course of their regular annual meeting schedules, NASDAQ proposes that companies comply with the remaining provisions of the amended listing rules, as set forth in proposed NASDAQ Listing Rule 5605(d) and IM-5605-6, by the earlier of: (1) their first annual meeting after January 15, 2014; or (2) October 31, 2014."

Pay Ratio Disclosures Made Simple

"The proposed pay ratio disclosure requirements specify that the ratio must be expressed as a ratio in which the median of the annual total compensation of all employees is equal to one, or, alternatively, expressed narratively in terms of the multiple that the [principal executive officer (PEO)] total compensation amount bears to the median of the annual total compensation amount. For example, if the median of the annual total compensation of all employees of a registrant is $45,790,39 and the annual total compensation of a registrant's PEO is $12,260,000,40 then the pay ratio disclosed would be '1 to 268'[.]"

Examples of Disclosures Regarding Conflict-Free Compensation Advisors

"New S-K Item 407(e)(3)(iv) provides that if any compensation consultant has played a role in determining or recommending the amount or form of executive and director compensation, and the consultant's work has raised any conflict of interest, then disclosure of the nature of the conflict and how the conflict is being addressed is required.... [Although the rule] does not require any disclosure if the compensation consultant's work did not raise any conflict of interest ... a review of 20 proxy statements filed [during January showed that] 12 companies (60%) made disclosures that their compensation consultant had no conflict of interest.... The disclosures also contain interesting discussions of procedures and practices companies are using in this area."

SEC Provides No-Action Relief on Regulation BTR

"Pfizer argued that the exchange offer would not result in inequitable treatment for those employees subject to a suspension, and hence Regulation BTR should not apply. In other words, this is not Enron. It's why Regulation BTR includes an exception for mergers etc., which should apply here, even if Rule 101(c)(9) does not specifically refer to exchange offers. The SEC granted the no-action request, subject to some conditions."