Recent NASDAQ Corporate Governance Proposals
(Continued)

Empower Audit Committee and Harmonize Listing Standards with the Act

• Require that audit committees have the sole authority to appoint, determine funding for, and oversee the outside auditors, as set forth in Section 301 of the Act.
• Require that audit committees approve, in advance, the provision by the auditor of all permissible non-audit services, as set forth in Section 202 of the Act.
• Require that audit committees have the authority to engage and determine funding for independent counsel and other advisors, as set forth in Section 301 of the Act.
•  Require that the audit committee establish procedures for the receipt, retention and treatment of complaints received by the issuer regarding accounting, internal accounting controls or auditing matters. Additionally, the audit committee is required to ensure that such complaints are treated confidentially and anonymously, as set forth in Section 301 of the Act.
• Require that in selecting the financial expert necessary for compliance with the NASDAQ audit committee composition requirements, issuers consider whether a person has, through education and experience as a public accountant or auditor or a principal financial officer, comptroller or principal accounting officer of an issuer or from a position involving the performance of similar functions, sufficient financial expertise in the accounting and auditing areas specified in the Act.
• Require that all audit committee members be able to read and understand financial statements at the time of their appointment rather than 'within a reasonable period of time' thereafter.
• Eliminate exceptions for the audit committee requirements for Small Business issuers.

Stock Options

• Require shareholder approval for the adoption of all stock option plans and for any material modification of such plans. An exemption would permit inducement grants to new employees if such grants are approved by an independent compensation committee or a majority of the company's independent directors. Exemptions will also be available for certain tax-qualified plans (e.g., employee stock ownership plans) and for the assumption of pre-existing grants in connection with an acquisition or merger. Existing option plans will be unaffected under this proposal, unless there is a material modification made to the plan.

Mandate Director Continuing Education

• In addition, the following rule is under consideration but has not yet been filed. This proposal would require continuing education for all directors will be required, pursuant to rules to be developed by the NASDAQ Listing and Hearing Review Council and approved by the Board.

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