NYSE Tells Members of New Investor Voting Regulations

June 24, 2003 (PLANSPONSOR.com) - The New York Stock Exchange (NYSE) has notified its member companies of new regulations requiring that new stock option plans, or significant changes to existing plans, will require shareholder approval under stricter rules.

The new rules, expected to take effect next week and currently pending US Securities and Exchange Commission approval, are the NYSE response to a wave of corporate scandals.   Under the proposal, all material revisions to equity-compensation plans, including the repricing of stock options, will be subject to shareholder approval. The exchange has also included for approval a major increase in the number of shares available under a stock option plan, according to a Reuters report.

Corporate stock option plans have attracted criticism from shareholder activists who complain that the repricing of stock options or issuing a generous set of new options in response to a drop in their stock’s price unfairly favors the executives.   The new rules would let shareholders reject such changes.

“The new NYSE rules applicable to shareholder approval of equity compensation plans and broker voting are expected to be effective for all US companies as of June 20, 2003,” said the memo, which was sent last Friday by Noreen Culhane, NYSE executive vice president for new listings and client services.

>Also included in the new regulations is a broker-voting rule that prevents NYSE-member brokerage firms from voting on behalf of shareholders in equity-compensation matters unless the shareholders have given voting instructions.

However, the rules would not apply to the exchange’s non-US. companies, which number nearly 500. Also excluded from the proposed rules are equity-related hiring bonuses, options changes due to mergers or acquisitions, and employee stock purchase plans.