15 U.S.C. § 78j–3 — Compensation committees

(a) Independence of compensation committees — (1) The SEC must direct national exchanges and associations to bar listing an issuer's stock if the issuer doesn't meet this subsection's rules — except this doesn't apply to a controlled company, limited partnership, bankrupt company, open-end investment company registered under the Investment Company Act, or a foreign private issuer that explains in its yearly disclosures why it lacks an independent compensation committee. (2) The SEC's rules must require every compensation committee member to be a board member and independent. (3) In defining "independent," exchanges and associations must weigh factors including: (A) where a board member's compensation comes from, including any consulting or advisory fees the issuer pays them; and (B) whether the board member is affiliated with the issuer or its subsidiaries. (4) The SEC's rules must let an exchange or association exempt a particular relationship from these independence rules, considering the issuer's size and other relevant factors. (b) Independence of compensation consultants and other compensation committee advisers — (1) A compensation committee can only pick a compensation consultant, lawyer, or other adviser after weighing the factors the SEC identifies under paragraph (2). (2) The SEC must identify factors affecting a consultant's, lawyer's, or adviser's independence. These factors must be neutral among categories of advisers and preserve the committee's ability to use any category. They include: (A) other services the adviser's employer provides to the issuer; (B) fees the adviser's employer gets from the issuer, as a share of that employer's total revenue; (C) the adviser employer's conflict-of-interest policies; (D) any business or personal relationship between the adviser and a committee member; and (E) any issuer stock the adviser owns. (c) Compensation committee authority relating to compensation consultants — (1)(A) The committee can, at its sole discretion, hire or consult a compensation consultant. (B) The committee is directly responsible for that consultant's hiring, pay, and oversight. (C) This doesn't force the committee to follow the consultant's advice, or limit the committee's own judgment. (2) In proxy materials for annual meetings held one year or more after July 21, 2010, the issuer must disclose whether the committee used a consultant, and whether that work raised a conflict of interest — and if so, what the conflict was and how it's being handled. (d) Authority to engage independent legal counsel and other advisers — (1) The committee can, at its sole discretion, hire independent legal counsel and other advisers. (2) The committee is directly responsible for their hiring, pay, and oversight. (3) This doesn't force the committee to follow their advice, or limit the committee's own judgment. (e) Compensation of compensation consultants, independent legal counsel, and other advisers — The issuer must properly fund, as the committee decides, reasonable pay for (1) a compensation consultant, and (2) independent counsel or other advisers to the committee. (f) Commission rules — (1) Within 360 days of July 21, 2010, the SEC must direct exchanges and associations to bar listing an issuer that doesn't meet this section's requirements. (2) The SEC's rules must let an issuer reasonably fix problems before that bar applies. (3)(A) The SEC's rules must let exchanges and associations exempt categories of issuers from this section, as they see fit. (B) In deciding exemptions, they must consider the impact on smaller reporting companies. (g) Controlled company exemption — (1) This section doesn't apply to a controlled company. (2) A "controlled company" is a listed issuer where more than 50% of the voting power in board elections is held by one individual, group, or another company.