NASDAQ has standards requiring that a majority of a company's board of directors be independent. To qualify as independent, a director cannot be an executive officer or employee of the company or have a relationship that could interfere with their independent judgment. NASDAQ provides a list of people who would not qualify as independent, including anyone employed by the company in the last 3 years, who received over $100,000 in compensation from the company in the last 3 years (excluding board compensation), who has a family member employed as an executive officer, or who is a partner or executive officer of an entity receiving over $200,000 or 5% of the company's revenues.

1. NASDAQ Capital Markets
Director Independence
Standards
NASDAQ Capital Markets Director Independence Standards– In the prior
LawCast in this series I gave a brief summary of the corporate
governance standards including the requirement that a majority of the
board of directors be independent and that all audit and compensation
committee members be independent…

2. NASDAQ Capital Markets Director Independence Standards
• A company must make its annual and interim reports available to
shareholders, either by mail or electronically through the company’s
website. The company’s board of directors is required to have a
majority of independent directors.
• Under NASDAQ rules “independent director” means a person that is
not an executive officer or employee of the company and does not
have a relationship with the company which, in the opinion of the
board of directors, could interfere with the exercise of independent
judgment in carrying out the responsibilities of a director.

3. NASDAQ Capital Markets Director Independence Standards
• NASDAQ provides a list of people that would definitely not qualify as independent, including the following:
• (i) a director who has been employed by the company at any time during the past 3 years;
• (ii) a director who has, or has a family member who has, accepted any compensation from the company in excess of
$100,000 during any period of 12 consecutive months within the prior 3 years other than (a) compensation for serving as a
director, (b) compensation to a family member who is an employee but not an executive officer; or (c) funds received under
certain qualified retirement plans;
• Continuing who does not qualify as independent
(iii) a director who is a family member of an individual who was employed as an executive officer of the NASDAQ company at
any time during the past 3 years;
• (iv) a director who is, or has a family member who is a partner, controlling shareholder or executive officer of any entity that
either gave or received payment for property or service of either $200,000 or 5% or more of the company’s gross revenues,
whichever is greater, during any of the prior most recent 3 years. Excluded from this disqualification category would be
payments made solely for investments in the NASDAQ Company’s securities or payment under a non-discretionary charitable
matching program.
• (v) Next not qualifying as independent would be a director who is, or has a family member that is, employed as an executive
officer of another company where a director of the NASDAQ company serves or served on the compensation committee
within the last 3 years; and
• (vi) A director who is or has a family member who is, a current partner of the company’s outside auditor, or was a partner or
employee of an outside auditor who worked on the NASDAQ company’s audit at any time during the past three years;

4. NASDAQ Capital Markets
Director Independence
Standards