A few weeks ago, I posted on the SEC’s release of C&DI’s clarifying its liberalization of the “Smaller Reporting Company” definition earlier this year. But I neglected to mention that the New York Stock Exchange (NYSE) had proposed a change to its rules on the same subject just one day before the SEC.
The NYSE also proposed a change to its rules to reflect the liberalized definition. The change to Section 303A.00 of the NYSE Listed Company Manual updates the threshold for listed companies to be eligible to benefit from the exemptions from the NYSE compensation committee requirements applicable to smaller reporting companies to match the SEC’s new definition. NYSE listed companies that satisfy the definition of smaller reporting company are not required to comply with:
- The enhanced requirements with respect to the independence of compensation committee members set forth in Section 303A.02(a)(ii) of the Manual; or
- The requirements with respect to the analysis of the independence of any compensation consultant, legal counsel or other adviser to the compensation committee, set forth under Section 303A.05(c)(iv) of the Manual.
These less stringent rules will apply in 2019 for companies that now qualify for the SRC status. However, absent further guidance, some of these companies may need to maintain a compensation committee that satisfies the “outside director” requirements of Code Section 162(m) for a few more years to certify that the pre-established performance goals were satisfied for payouts eligible for grandfathering protection.