On May 17 the NASDAQ Stock Market LLC (Nasdaq) filed a proposed rule change with the Securities and Exchange Commission. Under current Nasdaq rules that require a listed company’s audit, compensation and nominations committee to consist of “independent directors,” there is an exception to allow one non-independent director to serve on such committee for up to two years. However, a listed company cannot utilize this exception for an otherwise non-independent director who has a family member who is an employee of the listed company, even if that family member is not an executive officer of the company. Nasdaq proposes to amend its listing rules to allow an otherwise non-independent director who is a family member of a non-executive employee of a listed company to serve on the listed company’s audit committee, compensation committee or nominations committee under the exception referenced above.
It should be noted that a listed company’s board of directors utilizing the exception must still make an affirmative determination that the non-independent director’s membership on a committee is required by the best interests of the company and its stockholders.
Comments should be submitted to Nasdaq within 45 days of the publication of notice in the Federal Register. For more information, click here.