U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Statement Regarding Compensation Consultants and Compensation Committee Listing Standards


Chairman Mary L. Schapiro

SEC Open Meeting
Washington, D.C.
March 30, 2011

We now turn to our second matter, which also stems from the Dodd-Frank Act. Section 952 of that Act requires the Commission to direct the national exchanges to adopt certain listing standards relating to:

  • The independence of the members on a compensation committee.
  • The committee’s authority to retain compensation advisers.
  • The committee’s responsibility for the appointment, payment and work of any compensation adviser.

Once an exchange’s new listing standards are in effect, a listed company must meet these standards in order for its shares to continue trading on that exchange.

Get Adobe Flash player

In addition, Section 952 requires each company to disclose, in its proxy material for an annual meeting of shareholders, whether its board’s compensation committee retained or obtained the advice of a compensation consultant; whether the work of the compensation consultant has raised any conflict of interest; and, if so, the nature of the conflict and how the conflict is being addressed.

In developing the proposal before us, the staff has been guided by Congress’s direction and intent – both as evidenced in the Dodd-Frank Act, and as demonstrated in other pieces of legislation. For example, some aspects of Section 952 are parallel to provisions of the Sarbanes-Oxley Act of 2002 with respect to the independence of audit committee members.

We generally have construed these similarities to be indications of Congress’ intent for comparable regulatory treatment. However, some aspects of SOX are not the same as Section 952. So, we have construed these differences as evidence that Congress contemplated a different regulatory approach. I am particularly interested in hearing from commenters whether they believe our rules could better reflect these similarities and differences.

In addition, the proposed rules implement the statute’s direction with regard to exempting certain types of companies from the rules. The proposed rules would also authorize the exchanges to exempt any category of company from all of the requirements of the new compensation committee listing standards, after taking into account the potential impact of the requirements on smaller reporting companies.

As is our custom, before asking the staff to describe the proposal in more detail, I would like to thank those whose hard work has contributed to the matter before us. From the Division of Corporation Finance, thank you to Meredith, Tom Kim, Heather Maples, Sean Harrison, Nandini Acharya, Felicia Kung, Heather Mackintosh, Paula Dubberly, Tamara Brightwell, Anne Krauskopf, Paul Dudek, and Elliot Staffin. From the Division of Trading and Markets, thank you to David Shillman, Sharon Lawson, and Ira Brandriss. Thank you also to our colleagues in the Office of General Counsel, specifically Rich Levine, David Fredrickson and Bryant Morris. In the Division of Risk, Strategy and Financial Innovation, thank you to Jonathan Sokobin, Krishna Kamath, Ayla Kayan, and Vladimir Ivanov. From the Division of Investment Management, thanks to Susan Nash, Mark Uyeda and Matt De Les Dernier. And lastly, thank you to my colleagues on the Commission and to our counsels.

Now I'll turn the meeting over to Meredith Cross to hear more about the Division’s recommendations.



Modified: 03/30/2011