The new rules, proposed by the NYSE and the Nasdaq, establish what the SEC calls stricter and more detailed definitions of independence for directors of public companies and require each company to have a majority of independent directors.

Under the new rules, which are similar for both the NYSE and the Nasdaq, independent directors can't be employees of the company, nor can they or an immediate family member receive more than $100,000 a year in direct compensation from the company. This doesn't include director and committee fees, pension or deferred compensation for prior performance, the SEC added.

Further, to be considered independent, no member of the director's immediate family may be an executive officer of the company currently or during the past three years.

The approved rules require non-management directors to meet at regularly scheduled sessions without management, the SEC said. Compensation committees must consist entirely of independent directors.

Foreign companies may follow corporate governance standards applicable for their country, but must disclose in annual reports any differences from NYSE and Nasdaq standards, the SEC said. The Nasdaq, however, added that it won't grant exceptions that are contrary to U.S. federal securities laws, the SEC said.

For the most part, companies must comply with the new listing standards by their first annual meeting after Jan. 15, 2004, or by Oct. 31, 2004.