SEC© Disclosure and Corporate Governance: Two Reminders for the Compensation Committee

Publisher: Weil, Gotshal & Manges LLP

Since July 1^st, 2013, the New York Stock Exchange and the Nasdaq Stock Market have required that a compensation committee of a listed company may select or obtain advice from a compensation consultant, legal counsel or other adviser only after considering six enumerated factors relating to adviser independence.

The compensation committee should ensure that, in addition to considering the independence of any new adviser, it reconsiders the independence of existing advisers on at least an annual basis as suggested by the SEC. For detailed descriptions on the six enumerated factors relating to adviser independence please click here. A compensation committee is not precluded from obtaining advice from a non-independent adviser, and the listing standards do not require disclosure of whether an adviser is independent. However, since January 1, 2013, SEC© rules require disclosure of conflicts of interest of any compensation consultant, taking into account the same six factors. Listed companies should consider the most appropriate time to consider and/or reconsider adviser independence for 2014 and add this to the compensation committee’s annual calendar. In order to prepare, companies will need to gather information from advisers to the compensation committee, as well as directors and executive officers. Year 2 of the independence assessment may also be an appropriate time for the committee to review and refresh the procedures it has in place to ensure that the six independence factors are considered prior to retaining or receiving advice from an adviser.

For full access to the alert, please click here. What are your opinions on adviser independence and increased procedures for certification?