Nasdaq recently amended its rule proposal related to compensation committees required by the Dodd-Frank Act. While the substance of the proposal did not change too much, the transition requirements did, and became more workable.
Nasdaq proposes that Rule 5605(d)(3), relating to compensation committee responsibilities and authority, shall be effective on July 1, 2013. Specifically, this proposed rule states that a compensation committee must have the specific responsibilities and authority necessary to comply with Rule 10C-1(b)(2), (3) and (4)(i)- (vi) under the Exchange Act relating to the retention, compensation, oversight and funding of compensation consultants, legal counsel and other compensation advisers, as well as the requirement to consider the six independence factors enumerated in Rule 10C-1(b)(4) before selecting, or receiving advice from, such advisers.
To the extent a company does not have a compensation committee in the period before the final implementation deadline applicable to it as outlined in the paragraph below, the provisions of the rule shall apply to the independent directors who determine, or recommend to the board for determination, the compensation of the chief executive officer and all other executive officers of the company.
Nasdaq believes companies should consider under state corporate law whether to grant the specific responsibilities and authority referenced in Rule 5605(d)(3) through a charter, resolution or other board action; however, Nasdaq proposes to require only that a compensation committee, or independent directors acting in lieu of a compensation committee, have the responsibilities and authority referenced in Rule 5605(d)(3) by July 1, 2013. Companies must have a written compensation committee charter that includes, among others, the responsibilities and authority referenced in Rule 5605(d)(3) by the implementation deadline discussed below.
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.
A company must certify to Nasdaq, no later than 30 days after the final implementation deadline applicable to it, that it has complied with the amended listing rules relating to compensation committees. Nasdaq will provide companies with a form for this certification.