Corporate Governance

Director Compensation Project: ExxonMobil

By Brian Rulla

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, 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 Exxon Mobile (FNM-NYSE) 2009 proxy statement. According to the proxy statement, the company paid the directors the following amounts:

Director Compensation. ExxonMobil's board met 10 times in 2008. The incumbent directors, on average, attended approximately 96 percent of Board and committee meetings during 2008; and no director attended less than 75 percent of such meetings. ExxonMobil's non-employee directors held four executive sessions in 2008. Of the twelve directors, all but four directors received between $100,000 and $110,000 in cash compensation. The annual cash retainer for non-employee directors is $100,000 per year. Chairs of the Audit and Compensation Committees receive an additional $10,000 per year.

Director Tenure. Five of Exxon's twelve directors have joined the board since 2005. Ms. Nelson has the longest tenure serving on the board since 1991. Several directors also sit on other boards. Steven Rinemund, a director since 2007, also sits on the boards of American Express and Marriott. Director William George sits on the board of Goldman Sachs and is a Professor of Management at Harvard University.

Executive Compensation. Rex Tillerson, who serves as CEO and Chairman of the Board, received $22,414,602 in total compensation for 2008. This total represents a base salary of $1,870,000, a bonus of $4,000,000, $7,807,523 in stock awards, and an increase of $8,290,253 in pension value. Mr. Tillerson also received $38,930 in life insurance, a savings plan of $130,900, personal security of $222,985, and personal use of aircraft and properties totaling $45,251. Exxon increased its CEO's pay by almost $6 million in 2008, up from $16,726,742 in 2007.

Donald Humphreys serves as a Senior Vice President and Treasurer of Exxon. In 2008 he received total compensation of $11,878,031. Mr. Humphreys received $28,618 in life insurance, a savings plan of $63,700, personal security of $3,281, and personal use of properties totaling $4,090.

Full post as published by The Race to the Bottom on May 01, 2009 (boomark / email).