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ROLE AND AUTHORITY OF INDEPENDENT DIRECTORS STATUTORY / REGULATORY REQUIREMENTS Neither SOXA nor the Dodd-Frank Act addresses the role and authority of independent directors in general. However, SOXA does require director independence for audit committee membership (See “Audit Committee Requirements” below) and the Dodd-Frank Act requires director independence for compensation committee membership. (See “Compensation Committee Requirements” below.) NYSE REQUIREMENTS Majority of Independent Directors. Independent directors must comprise a majority of the board. 11 (See “Definition of ‘Independent’ Director” below.) Cure. The NYSE listing standards do not contain specific cure provisions for violations of the requirement that a majority of directors be independent. The NYSE’s general procedures for listing standard violations apply in such instances. (See “Enforcement, Notifications and Affirmations” below.) Controlled Company Exemption. “Controlled companies” (of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company) are not required to have a majority of independent directors. 14 Executive Sessions. Non-management directors must meet in regularly scheduled executive sessions (without members of management present). 16 If the regularly scheduled executive sessions of the nonmanagement directors include nonindependent directors, then an executive session with only independent directors must be scheduled at least once a year. A company may choose to hold regular sessions of independent directors only. 17 NASDAQ REQUIREMENTS Majority of Independent Directors. Independent directors must comprise a majority of the board. 12 (See “Definition of ‘Independent’ Director” below.) Cure. If a company fails to comply with the majority independent director requirement due to a vacancy on the board or because a director is no longer independent for reasons that are beyond the director’s reasonable control, the company has at least 180 days to comply. 13 A company relying on this provision must notify Nasdaq upon learning of the non-compliance. (See “Enforcement, Notifications and Affirmations” below.) Controlled Company Exemption. “Controlled companies” (of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company) are not required to have a majority of independent directors. 15 Executive Sessions. Boards must convene regular meetings of independent directors in executive session (without members of management present). 18 Executive sessions should occur at least twice a year. 19 Weil, Gotshal & Manges LLP 4 US_ACTIVE:\44182171\7\99980.0865
ROLE AND AUTHORITY OF INDEPENDENT DIRECTORS (continued) Presiding Directors. A non-management director must preside at the executive sessions, although the same director is not required to preside at all executive sessions. 20 Annually, the name of the director presiding at the executive sessions, or the procedure by which the presiding director is selected for each executive session, must be disclosed on the company’s website or in the proxy statement (or, if the company does not file a proxy statement, in the company’s annual report on Form 10-K), together with information about how interested parties can communicate with the presiding director or the non-management directors as a group. 21 Committee Independence Requirements. In addition to an independent audit committee 22 (see “Audit Committee Requirements” below), companies must have: Presiding Directors. The Nasdaq listing standards do not address the leadership of executive sessions. Committee Independence Requirements. In addition to an independent audit committee 26 (see “Audit Committee Requirements” below), companies must have: • an independent compensation committee 23 (see “Compensation Committee Requirements” below); and • until the earlier of the first annual meeting after January 15, 2014, or October 31, 2014, CEO and executive officer compensation determined or recommended to the board for approval by an independent compensation committee or by a majority of the independent directors. 27 (The CEO may not be present for voting or deliberations regarding his/her compensation) (see “Compensation Committee Requirements” below); or • by the earlier of the first annual meeting after January 15, 2014, or October 31, 2014, an independent compensation committee 28 (see “Compensation Committee Requirements” below); and • an independent nominating/corporate governance committee 24 (see “Nominating/Corporate Governance Committee Requirements” below). Companies may allocate the responsibilities • director nominees selected or recommended for the board’s selection by an independent nominating committee or by a majority of the independent directors 29 (see “Nominating/Corporate Governance Committee Requirements” Weil, Gotshal & Manges LLP 5 US_ACTIVE:\44182171\7\99980.0865
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91 After reviewing this report and
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110 Rule 10C-1(b)(5)(i). 111 NYSE L
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146 Nasdaq Equity Rule 5605(e)(4).
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any of the NYSE board structure req
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