Corporate Governance

Director Compensation Project: Ford

By Mark Dunn

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation. We are including companies from 2009's Fortune 100 and using information found in their 2009 proxy statements. In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence. While substantially the same, there are some minor differences between NYSE and NASDAQ rules that are worth noting.

Under NYSE Rule 303A.01, all listed companies must have a majority of independent directors sitting on their boards. Directors are not independent if they received over $120,000 in direct compensation, other than director's fees, in any one year period over the last three years pursuant to Rule 303A.02(b)(ii). This is a looser restriction than the equivalent NASDAQ Rule, 4200(a)(15), which includes all compensation. Rule 303A.06 requires that, in addition to the general independence standards, audit committee members must comport with the requirements of Exchange Act Rule 10A-3 (C.F.R. §240.10A-3), also known as SOX 301.

One can see some of the effects of these rules when looking at the director compensation table from Ford's (F-NYSE) 2009 proxy statement. According to the proxy statement, the company paid the directors the following amounts:

* Fees earned pursuant to a 2006 consulting contract.

Director Compensation. Ford's board met eight times in 2008. All directors attended at least 75% of the combined Board of Director and committee meetings held during the periods served by such nominee. Only two directors received less than $100,000 in direct cash compensation. Non-management directors averaged $43,466 in other compensation, including such perquisites as the use of two company vehicles and certain insurance.

Director Tenure. Six of Ford's eleven directors have served on the board since at least 2001. Edsel B. Ford II and Ellen R. Marram have the longest tenure, serving on the board since 1988. Several directors serve on other boards. Mr. Thornton, a former chairman of Goldman Sachs, serves on the board of News Corporation, Intel, Inc., China Netcom Group Corporation (Hong Kong) Limited, and the Industrial Commercial Bank of China Limited.

CEO Compensation. Mr. Allan Mulally serves as President and CEO of Ford. In 2008, his total compensation was $13,565,378. His compensation included a $2,000,000 salary, stock awards worth $1,849,241, and $1,046,390 in 'other compensation.' The 'other compensation' included $344,109 for personal use of Company and private aircraft, $112,114 for home security, and $109,697 for temporary housing. Mr. Mulally's total compensation was down considerably from his 2007 and 2006 compensation, which was $21,671,978 and $28,183,476 respectively. Ford's second highest paid employee in 2008 was Mark Fields, Executive Vice President and President of Operations in America G.L. Kirkland. His total compensation amounted to $4,829,298.

Full post as published by The Race to the Bottom on May 04, 2009 (boomark / email).