On June 20, 2012, the Securities and Exchange Commission ("SEC") approved a new rule that directs national securities exchanges to adopt listing standards for public company boards of directors and compensation advisers.  As required by Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the new rule requires exchange listing standards to address:

  • the "independence" of the members on a compensation committee;
  • the committee’s authority to retain compensation advisers;
  • the committee’s consideration of the independence of any compensation advisers; and
  • the committee’s responsibility for the appointment, compensation, and oversight of the work of any compensation adviser.

The SEC also adopted amendments to the proxy disclosure rules (specifically Item 407 of Regulation S-K) concerning issuers’ use of compensation consultants and related conflicts of interest. 

Each national securities exchange must provide to the SEC their proposed rule change submissions that comply with the requirements of Securities Exchange Act no later than 90 days after publication of the new rule in the Federal Register.  Issuers must comply with the disclosure changes in Item 407 of Regulation S-K in any proxy or information statement for an annual meeting of shareholders (or a special meeting in lieu of the annual meeting) at which directors will be elected occurring on or after January 1, 2013.