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Nasdaq corporate governance reform actions

Our Markets Bureau
26 July 2002

New York: The Nasdaq Stock Market (www.nasdaq.com) announced that its board of directors has approved more than 25 new corporate governance reform proposals designed to increase accountability and transparency for the benefit of investors. Pending approval by the NASD board, they will be forwarded to the SEC for final approval.

Nasdaq has adopted listing standards that will help our companies build on their commitment to provide increased transparency for investors, says Nasdaq chairman and CEO Hardwick Simmons. The new requirements are designed to help investors make better decisions. Nasdaq solicited input from a wide range of parties, including the investor, legal, accounting and academic communities, as well as its listed companies to address the full gamut of corporate governance issues.

Actions taken by the Nasdaq board include: Increase board independence

  • Majority of board members will be independent
  • Regular meetings of independent directors in executive session
  • Further tightening of definition of independence - Excludes large shareholders, relatives of executives, and employees of outside auditor - Establishes a three-year cooling off period for all non-independent directors before they can be considered independent

Empower audit committees

  • Sole authority to hire and fire independent auditors
  • Sole authority to approve all non-audit related services
  • Authority to retain legal, accounting and other experts

Strengthen the role of independent directors in compensation and nomination decisions

  • Executive officer compensation must be approved by an independent compensation committee or by a majority of the independent directors
  • All director nominations must be approved by an independent nominations committee or by a majority of the independent directors
  • Allow one non-independent director to serve on compensation or nomination committees under certain disclosed circumstances

Mandate director continuing education

  • The Board indicated the desire for companies to require continuing education for all directors. The board has asked the Nasdaq Listing and Hearing Review Council to develop appropriate rules.
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