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Frequently Asked Questions
  Staff Interpretation Letter 2003-35  
Identification Number 1004
Rule 4200(a)(15):  “Independent director” means a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Relevant Facts:  Upon the retirement of the company’s chairman of the board and chief executive officer in 2001, the position of chief executive officer (“CEO”) was offered to Mr. X, who was then serving as an outside director to the company.  Mr. X informed the company’s board that his acceptance of the CEO position was contingent upon the appointment of another individual, Mr. Y, to the position of non-executive chairman of the board  (“Chairman”).  Mr. Y, who was then serving as an outside director to the company, had a previous working relationship with Mr. X at another organization.  The company represented that its board of directors had reviewed this relationship and had determined that it did not interfere with Mr. Y’s exercise of independent judgment.
The company further represented that its compensation committee considered the additional time and responsibilities associated with the position of Chairman and granted Mr. Y additional annual compensation for his board services.
Issue:  Does the compensation paid to Mr. Y for his services as a non-executive Chairman preclude him from serving as an independent director, pursuant to Listing Rule 4200(a)(15)?
Determination:  No.  The fees paid to Mr. Y for his service as Chairman do not preclude him from serving as an independent director, pursuant to Listing Rule 4200(a)(15), because it was for board services only.  Please note, however that NASDAQ did not make a determination regarding Mr. Y’s independence, as that requires a subjective determination by the company’s board of directors.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 1004
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