NYSE MKT Rules

In the prior Lawcast in this series I gave a brief summary of the corporate governance standards including the requirement that, subject to certain exceptions, a majority of the board of directors be independent and that all audit and compensation committee members be independent. Moreover, audit and compensation committee members are subject to even more stringent independence requirements.

Under NYSE MKT rules a person is independent only if that person is not an executive officer or employee of the company and the Board determines that the person does not have any material relationships, directly or indirectly, with the company outside of being a director which could interfere with the exercise of independent judgment in carrying out the responsibilities of a director. An independence determination must be made at the time of nomination or appointment and must be reviewed at least annually. Moreover, a director has the responsibility of updating the board of any change in relationships or interests that might effect that director’s independence.

NYSE MKT provides a list of people that would definitely not qualify as independent, including the following:
(i) a director who has been employed by the company at any time during the past 3 years;

(ii) a director who has, or has a family member who has, accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the prior 3 years other than (a) compensation for serving as a director, (b) compensation to a family member who is an employee but not an executive officer; (c) compensation received as a former interim executive officer; or (d) funds received under certain qualified retirement plans;

(iii) a director who is a family member of an individual who was employed as an executive officer of the NYSE MKT company at any time during the past 3 years;

(iv) a director who is, or has a family member who is a partner, controlling shareholder or executive officer of any entity that either gave or received payment for property or service of either $200,000 or 5% or more of the company’s gross revenues, whichever is greater, during any of the prior most recent 3 years. Excluded from this disqualification category would be payments made solely for investments in the NYSE MKT Company’s securities or payment under a non-discretionary charitable matching program.

(v) Next not qualifying as independent would be a director who is, or has a family member that is, employed as an executive officer of another company where a director of the NYSE MKT company serves or served on the compensation committee within the last 3 years; and

(vi) A director who is or has a family member who is, a current partner of the company’s outside auditor, or was a partner or employee of an outside auditor who worked on the NYSE MKT company’s audit at any time during the past three years;

In the next Lawcast in this series I will discuss the exceptions to the independence requirements.