NASDAQ and NYSE Shareholder Approval Rules Pending

Under pressure from the SEC, the NYSE and the NASDAQ are considering changes in their current rules for shareholder approval of option grants. On both exchanges, current rules provide exemptions form shareholder approval for plans that are broad-based, defined by the NYSE as plans in which a majority of the options are issued to non-exempt employees and in which a majority of full-time non-exempt employees are eligible to participate. NASDAQ has a similar exemption, but simply states that the plan must cover a majority of employees.

The proposed NYSE rules, which NADAQ is considering as well, would require shareholder approval of any plan in which officers and directors participate and the proposed dilution (measured in terms of currently outstanding options and options that have been authorized but not issued) is 10% or more of the existing authorized dilution under the plan. However, options issued in conjunction with acquisitions of other companies or to new employees would not be counted.