Corporate Governance

The Director Compensation Project- ExxonMobil

By DJ Ringquist

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation. We are including companies from 2010's Fortune 500 and using information found in their 2010 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, 5605(a)(2), 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 ExxonMobil's (NYSE:XOM) 2010 proxy statement. According to the proxy statement, the company paid the directors the following amounts:

Director Compensation. The Board met 11 times in 2009. ExxonMobil's incumbent directors, on average, attended approximately 94% of Board and committee meetings during 2009. No director attended less than 75% of such meetings. Each director (other than Mr. Frazier) received an annual grant of 2,500 restricted shares in January 2009. Mr. Frazier received a one-time grant of 8,000 restricted shares upon being first elected to the Board in May 2009.

Director Tenure. In 2009, Mrs. Nelson, who has held her position as a member of the Board of Directors since 1991, held the longest tenure. Several directors also sit on other boards. Mr. Whitacre is Chairman of the Board and Chief Executive Officer of GM, and Mr. Palmisano is Chairman of the Board, President, and Chief Executive Officer of IBM. Mr. Reinemund is also a director of American Express and Marriott.

CEO Compensation. Rex Tillerson, who has served as ExxonMobil's Chief Executive Officer since January, 2006, earned $27,168,317 in 2009. He has also accrued $40,040,536 in early retirement benefits under Exxon's three pension plans. Senior Vice President Donald Humphreys earned $11,870,594 during the fiscal year.

Full post as published by The Race to the Bottom on December 04, 2010 (boomark / email).