NASDAQ Amends Compensation Committee Independence Requirements

The NASDAQ Stock Market (NASDAQ) recently amended its listing rules on compensation committee independence¹ that were adopted earlier this year to implement Rule 10C-1 of the Securities Exchange Act of 1934.² Specifically, NASDAQ is amending Listing Rule 5605(d)(2)(A) and IM-5605-6 to eliminate the bright-line prohibition on the receipt of compensatory fees by compensation committee members from the listed company and its subsidiaries.

The bright-line prohibition will be replaced by a requirement that a board of directors consider the source of a director's compensation, including the receipt of compensatory fees from the company and its subsidiaries, when affirmatively determining independence for compensation committee membership. The amendments align NASDAQ's compensation committee independence listing rule with Rule 10C-1, which does not require a prohibition on the receipt of compensatory fees, and the compensation committee listing standards of the New York