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COMPENSATION COMMITTEE REQUIREMENTS (continued)
(e) any stock of the company owned by the compensation consultant, legal counsel
or other adviser; and
(f) any business or personal relationship of the compensation consultant, legal
counsel, other adviser or the person employing the adviser with an executive officer of the
company.
Authority to Engage Advisers. Also as required by Section 952, Rule 10C-1(b)(2)-(3)
requires each listed company to (1) authorize its compensation committee to (a) in its sole
discretion, retain or obtain the advice of a compensation consultant, independent legal counsel
or other adviser; and (b) be directly responsible for the appointment, compensation and
oversight of the work of compensation consultants, independent legal counsel for the
committee and other committee advisers; and (2) provide for appropriate funding (as
determined by the compensation committee) for payment of reasonable compensation to
consultants, legal counsel and advisers retained by the compensation committee.
Required Disclosures. New Item 407(e)(3)(iv) of Regulation S-K requires disclosure of the
nature of any conflicts of interest raised by the work of any compensation consultant who is
subject to disclosure pursuant to Item 407(e)(3)(iii) 105 (a consultant who had any role in
determining or recommending the amount or form of either executive or director compensation
during the last fiscal year) and how the conflict is being addressed. 106 This disclosure must be
included in proxy (or information) statements for annual meetings (or special meetings in lieu
thereof) at which directors are to be elected, occurring on or after January 1, 2013. This
disclosure requirement applies to all companies that are subject to the SEC’s proxy rules,
whether or not listed and whether or not exempt from other listing rules contemplated by Rule
10C-1 and Section 952.
Exemptions. “Controlled companies” and “smaller reporting companies” are exempt from the
requirements that are the subject of Rule 10C-1. 107 “Controlled company” means a company
that is listed on a stock exchange and holds an election for the board of directors of the
company in which more than 50 percent of the voting power is held by an individual, a group
or another company. 108 “Smaller reporting company” means an issuer (other than an
investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is
not a smaller reporting company) that had (a) a public float of less than $ 75 million as of the
last business day of its most recently completed second fiscal quarter or as of a date within 30
days of the date of filing of an initial registration statement, or (b) in the case of an issuer with
zero public float, revenues of less than $50 million during the most recently completed fiscal
year for which audited financial statements are available. 109 The exchanges are permitted to
exempt other categories of companies, particularly taking into account the potential impact on
smaller issuers. 110
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