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NDAQ » Topics » ELECTION OF CLASS 2 DIRECTORS

This excerpt taken from the NDAQ DEF 14A filed May 2, 2005.

ELECTION OF CLASS 2 DIRECTORS

 

The business and affairs of Nasdaq are managed under the direction of the Board of Directors. The Certificate of Incorporation establishes a classified Board of Directors, comprised of three classes of directors, with the directors of each class having three-year terms that expire at successive annual meetings. Class 2 directors are to be elected at the annual meeting by the Holders for terms expiring at the 2008 annual meeting of stockholders and upon their successors being duly elected and qualified. If, however, the Holders approve Proposal III to eliminate the classification of the Board of Directors, directors will be elected annually upon expiration of their current term. Therefore, if Proposal III is approved, the term of office for Class 2 directors will expire at our annual meeting in 2006 (instead of 2008). See Proposal III: Amend Nasdaq’s Certificate of Incorporation for more information on this proposal.

 

Pursuant to the Certificate of Incorporation and Nasdaq’s By-Laws, the Board of Directors may determine the total number of directors. The authorized size of the Board of Directors currently is 17 directors, consisting of five Class 1 directors, five Class 2 directors and seven Class 3 directors. The directors whose terms will expire at the annual meeting are: John P. Havens, Patrick Healy, Thomas G. Stemberg and Mary Jo White. Mr. Havens is retiring from the Nasdaq Board and will not stand for re-election at the annual meeting. Each of the other Class 2 directors has been nominated for re-election. In addition, Daniel Coleman and Merit E. Janow have been nominated by the Nominating Committee to stand for election as Class 2 directors at the annual meeting. Mr. Coleman was initially recommended to the Nominating Committee by a member of Nasdaq’s senior management. Professor Janow was initially recommended to the Nominating Committee by a member of that committee.

 

All nominees have consented to be named in this proxy statement and to serve on the Board of Directors, if elected. In the event that any nominee should not be available, the persons named in the proxy will vote for the other nominees and may vote for a substitute for the unavailable nominee.

 

Under Nasdaq’s By-Laws, all directors are classified as either Industry Directors, Non-Industry Directors, or Staff Directors (each as described below). In addition, Non-Industry Directors may also be classified as Public Directors or Issuer Representatives (each as described below). The number of Non-Industry Directors, including at least one Public Director and at least two representatives of Nasdaq-listed companies (an “Issuer Representative”), is required to equal or exceed the number of Industry Directors, unless the Board of Directors consists of nine or fewer directors. In such case only one director is required to be an Issuer Representative. Nasdaq establishes the classification of each director based on a questionnaire with specific questions related to each of the classifications discussed below. Nasdaq’s Corporate Secretary annually certifies to the Board of Directors the classification of each director.

 

The following is a general description of Nasdaq’s director classifications:

 

  •  

Industry Director means a director (excluding any two officers of Nasdaq, selected at the sole discretion of the Board of Directors, amongst those officers who may be serving as directors (the “Staff Directors”)) who (i) has served in the prior three years as an officer, director, or employee of a broker or dealer, excluding an outside director or a director not engaged in the day-to-day management of a broker or dealer; (ii) is an officer, director (excluding an outside director), or employee of an entity that owns more than 10% of the equity of a broker or dealer, and the broker or dealer accounts for more than 5% of the gross revenues received by the consolidated entity; (iii) owns more than 5% of the equity securities of any broker or dealer, whose investments in brokers or dealers exceed 10% of his or her net worth, or whose ownership interest otherwise permits him or her to be engaged in the day-to-day management of the broker or dealer; (iv) provides professional services to brokers or dealers, and such services constitute 20% or more of the professional revenues received by the director or member or 20% or more of the gross revenues received by the director’s or member’s firm or partnership; (v) provides professional services to a

 

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director, officer, or employee of a broker, dealer, or corporation that owns 50% or more of the voting stock of a broker or dealer, and such services relate to the director’s, officer’s or employee’s professional capacity and constitute 20% or more of the professional revenues received by the director or 20% or more of the gross revenues received by the director’s or member’s firm or partnership; or (vi) has a consulting or employment relationship with or provides professional services to the NASD, NASD Regulation, Inc. (“NASDR”), Nasdaq, or the American Stock Exchange LLC (“Amex”) or has had any such relationship or provided such services at any time within the prior three years.

 

  •   Non-Industry Director means a director (excluding the Staff Directors) who is (i) a Public Director; (ii) an officer or employee of an issuer of Nasdaq-listed securities or securities traded in the over-the-counter market (“Issuer Representative”); or (iii) any other individual who would not be an Industry Director.

 

  •   Public Director means a director who has no material business relationship with a broker or dealer or the NASD, NASDR, or Nasdaq and does not meet the definition of Industry Director set forth above.

 

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