SEC Directs Securities Exchanges to Adopt New Listing Standards on Pay Committees

The Securities and Exchange Commission (SEC) approved Wednesday a rule that directs national securities exchanges to adopt listing standards for public company boards of directors and compensation advisors.

The new rule, required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, requires exchange listing standards to address:

• The independence of the members on a compensation committee;
• The committee’s authority to retain compensation advisors;
• 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 advisor. 

Once an exchange’s new listing standards are in effect, a listed company must meet the standards in order for its shares to continue trading on that exchange, the SEC says.

“This rule will help to enhance the board’s decision-making process on executive compensation matters, particularly the selection, engagement and oversight of compensation advisors, and will provide more transparency with respect to conflicts of interest of consultants engaged by boards,” said SEC Chairman Mary Schapiro, in a statement.