NYSE, Nasdaq Proposals Would Require Shareholder Approval of Stock Option Plans

Washington, DC, October 18, 2002 - The Institute strongly supports two proposals recently published for comment by the SEC that would give shareholders a role in the authorization of stock option plans. The proposals were made separately by the New York Stock Exchange (NYSE) and the Nasdaq Stock Market, but are substantially similar. Comments on the proposals are due the SEC in early November.

The NYSE and Nasdaq proposals would require listed companies to give their shareholders the opportunity to vote on most equity-compensation plans. The requirement is similar to a recommendation made in June as part of a report by the NYSE Corporate Accountability and Listing Standards Committee, which the Institute strongly supported in a subsequent comment letter and statement.

Under the proposals, shareholders also would have the opportunity to vote on any material revisions to the terms of equity-compensation plans, except inducement awards, plans relating to mergers or acquisitions, and tax qualified and parallel nonqualified plans. Equity-compensation plans would be deemed not to include any plan that is made available to shareholders generally.

The NYSE proposal would also amend Rule 452 to preclude broker-dealers from voting proxies on equity-compensation plans unless the beneficial owner of the shares has given the broker-dealer voting instructions.

The NYSE also plans to establish a working group to advise it with respect to the need for, and design of, mechanisms to facilitate implementation of this proposal.