Corporate Governance

The Director Compensation Project: Boeing

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 2008 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 Boeing's (BA-NYSE) 2009 proxy statement. According to the proxy statement, the company paid the directors the following amounts:

* Compensation amount reflects fees earned through retirement date.

Director Compensation. During 2008, Boeing's board of directors met eight times, having six regular meetings and two special meetings. Each incumbent director attended at least 83% of the meetings of the Board and the committees on which he or she served.

Of the eleven directors, all but one director received between $75,000 and $106,000 in cash compensation. Non-employee directors averaged $219,482 in total compensation for their services.

Director Tenure. Four of the eleven active directors have served on the board since 1997. Mr. Bryson has the longest tenure serving on the board since 1995. The average tenure of board is eight years. Several directors also sit on other boards. Mr. Duberstein, a director since 1997, is also a director of ConocoPhillips, Fannie Mae, and St. Paul Travelers Companies. Mr. Biggs is a director at J.P. Morgan Chase & Co. and the National Bureau of Economic Research as well as a trustee of Washington University in St. Louis.

Executive Compensation. W. James McNerney, Jr., who serves as Chairman, President and CEO, received $18,979,605 in total compensation for 2008. Of his total compensation, Mr. McNerney received $1,915,288 as base cash salary. In addition, Mr. McNerney received $463,415 in personal benefits paid by the company, life insurance premiums of $267,725, and company contributions to retirement plans of $114,917. The personal benefits included $287,062 for personal use of Company aircraft, $67,157 in personal legal services, and $57,994 for personal use of a transportation service (car and driver). Mr. McNerney's compensation changed little from what he received in 2007, which was $18,997,099

James A. Bell, Boeing's Chief Financial Officer, received $5,905,119 in total compensation for 2008, including a base cash salary of $806,149. Mr. Bell received $322,607 in personal benefits paid by the company, which included $258,139 for personal use of Company aircraft and $47,485 for personal use of a transportation service (car and driver).

Full post as published by The Race to the Bottom on May 19, 2009 (boomark / email).