Corporate Governance

The Director Compensation Project - Verizon

By Patrick Wagner

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 Verizon's (NYSE:VZ) 2010 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:

Director Compensation.  During fiscal year 2009, Verizon held nine Board of Directors meetings and 24 Board Committee meetings.  Each director attended at least 75% of the aggregate number of meetings of the Board of Directors and meetings of the Board Committees on which he or she served.  All Board members attended the mandatory annual meeting of shareholders in 2009.  Each non-employee director of Verizon receives an annual cash retainer of $85,000 and an annual grant of $130,000 in fair market value of the company's stock.  Each Committee Chairperson receives an additional annual retainer.  Additionally, Verizon maintains a charitable giving program for directors elected prior to 1992.  This program directs the company to make a $500,000 contribution to charitable or educational organizations designated by the director upon the director's death.

Director Tenure.  In 2009, Mr. O'Brien held the longest tenure, having been a director since 1987.  Every director also sits on atleast one other board.  Mr. Neubauer is also a director for Macy's Inc., and has previously served as a director for Wachovia Corporation and CIGNA Corporation.  Mr. Slater also serves as a director for Delta Air Lines, Inc., ICx Technologies, Inc., Kansas City Southern, and Transurban Group.

CEO Compensation.  Dennis F. Strigl served as Verizon's Chief Operating Officer during the 2009 fiscal year and earned $29,121,387 in total compensation.  Mr. Strigl received $18,550,000 upon his departure from Verizon in December of 2009 as part of his employment contract.  This separation payment was to be paid to Mr. Strigl on or about July 1, 2010.  Ivan G. Seidenberg served as Verizon's Chairman and Chief Executive Officer during the 2009 fiscal year and earned $17,534,331 in total compensation.  Mr. Seidenberg received the largest stock award of any CEO at $11,079,000, well over the majority of his total compensation.

Full post as published by The Race to the Bottom on December 13, 2010 (boomark / email).