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Release: Contacts: Issuer & Attorney Contact: |
June
5, 2002 |
Note:
Rule
proposals in this press release may have been revised. See "Summary
of NASDAQ Corporate Governance Proposals" for the most recent version
of NASDAQ's rule proposals. Click
here.
Nasdaq Submits First Round of Corporate Governance
Rule Changes to the SEC; Announces Plan for
Additional Issues for Review This Month
New York, NY — The Nasdaq Stock Market, Inc. (Nasdaq®) announced today that several key rule changes that were approved by its board of directors on May 22, 2002, will be filed beginning tomorrow with the U.S. Securities and Exchange Commission (SEC). These new rules will soon be published in the Federal Register, be subject to comment periods, and could be implemented for Nasdaq companies later this summer.
Nasdaq also announced the next round of corporate governance reforms to be examined at the next meeting of the Nasdaq Listing and Hearing Review Council in San Francisco June 26-28. These represent ideas that stem from a meeting in March by the Council, the April 12 letter from Nasdaq Chairman and CEO Wick Simmons to SEC Chairman Harvey Pitt, and a meeting of Council subcommittee chairs earlier this week. They include:
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a majority of independent directors on corporate boards;
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compensation committees composed solely of independent directors;
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a cooling-off period during which former auditors would be precluded from serving on corporate audit committees;
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expanding the scope of audit committee authority;
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strengthening continuing education for directors;
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increasing the use of corporate codes of conduct and compliance methods to support them; and
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mandate non-U.S. companies to disclose if they have received waivers of corporate governance standards through a new SEC disclosure requirement.
"We are in the middle of a process to strengthen corporate governance standards for companies listed on Nasdaq," said Wick Simmons, chairman and chief executive officer, Nasdaq. "We place investor protection and investor confidence as our paramount concern. Today, we're not just talking concepts. We're filing rule proposals with the SEC that have been approved by our board of directors. We expect that additional rule proposals will be presented to our board in July."
The rule filings, which will be submitted to the SEC beginning tomorrow, concern the following subjects:
Stock Option Plans
Requires shareholder approval for all plans in which officers and directors participate. Although existing exemptions for inducement grants to new executive officers and tax qualified, non-discriminatory plans such as Employee Stock Ownership Plans (ESOP) were retained, the new rule does not include the so-called "treasury share" exception that would permit a company to use certain repurchased shares to fund options to executive officers without prior shareholder approval.
Independent Directors
The definition will be extended to prohibit any payments, other than for board service, including political contributions, in excess of $60,000 and will extend to receipt of such payments by a family member of the director. Furthermore, a director will not be considered independent if the company makes payments to a charity where the director is an executive officer and such payments exceed the greater of $200,000 or five percent of either the company's or the charity's gross revenues.
Related Party Transactions
A company's audit committee or a comparable body of the board of directors must review and approve all related-party transactions.
Explicit Prohibition on Misrepresenting Information to Nasdaq
A material misrepresentation or omission by an issuer to Nasdaq may result in the company being delisted.
Requirement to Disclose Audit Opinions with Going Concern Qualifications
A going concern qualification must be brought to the attention of investors and potential investors through a press release.
Disclosure of Material Information
The Nasdaq rule on disclosure of material information rule will be harmonized with SEC Reg FD to facilitate disclosure by issuers using Reg FD methods such as conference calls, press conferences and web casts, so long as the public is provided adequate notice (generally by press release) and granted access.
As part of its process in developing these rule changes and other reforms, in May, Nasdaq hosted Corporate Governance Summits in San Jose, California, and New York City. Many senior executives of Nasdaq-listed companies attended and interacted with speakers from the investment community, investor advocates, the accounting profession, and the SEC. A report will be written and forwarded to the SEC, the Council, and the board for their consideration as they review corporate governance issues.
Nasdaq is the world's
largest stock market. With nearly 4,000 companies, Nasdaq lists more
companies and trades more shares per day than any other U.S. market.
Over the past five years, Nasdaq has outpaced all other U.S. markets
in listing IPOs. It is also home to category-defining companies that
are leaders across all areas of business including technology, retail,
communications, financial services, media and biotechnology industries.
With operations on three continents, Nasdaq is a key driver of global
capital formation. For more information about Nasdaq, visit the Nasdaq
Web site at www.nasdaq.com
or the Nasdaq NewsroomSM at www.nasdaq.com/newsroom.