NASDAQ Proposes Broadening Ability Of Non-Independent Directors To Serve On Board Committees

Author:Ms Laurie Green, Michael George Taylor and Danielle C. Price
Profession:Holland & Knight

Laurie Green is a Partner in our Ft Lauderdale office, Michael Taylor a Partner in our Portland office and Danielle Price a Partner in our Miami office.

On May 30, 2012, NASDAQ filed a proposed rule change with the SEC that would permit non-independent directors to serve on board committees despite having a family member employed by the same company in a non-executive role.

The current NASDAQ rules require that certain board committees, specifically audit, compensation and nomination committees, consist solely of independent directors. The same rules exclude specific categories of individuals from independent director status, including:

directors who were employed by the same company in the previous three years directors that are related to a company employee who received compensation in excess of $120,000 in one of the previous three years directors that are related to a company employee serving in an executive role Accordingly, a company may employ the relative of an independent director without eliminating the director's independent status, as long as the employee (1) was not compensated in excess of $120,000 in any of the preceding three years, or (2) did not serve in an executive role.

In December 1999, NASDAQ crafted a small exception to the rule that non-independent directors are prohibited from serving on a company's audit, compensation, or nominations committee. The exception allowed a single non-independent director to serve on a company's audit committee for a two-year period if the company's board, under "limited and exceptional circumstances," believed the appointment was in the best interests of the company and its...

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