Corporate Governance

We have often noted that neither Delaware nor the stock exchanges consider fees in determining director independence.  This leads to absurd results.  Directors who make in the vicinity of $700,000 in fees are considered independent by the NYSE while those who make substantially less (any amount over $120,000) are not independent if the amount is paid as consulting income rather than fees. 

Nasdaq requires that directors disqualify as independent any executive officer "having a relationship which, in the opinion of the Company's board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director." Nowhere does the Listing Standard exclude fees yet from all appearances, Nasdaq does not require boards to consider fees in assessing independence.

It is perhaps no surprise, therefore, that regulatory reform is potentially on the way.  Senator Dodd's bill would give the SEC the authority to control the definition of independent under the rules of the stock exchanges and would specifically instruct the SEC to consider the role of fees in the definition. 

In light of this approach, we will, from time to time, pick out highly paid directors who are treated as independent in the company's proxy statement.  Take for example InFinera Corporation.  According to the Company's proxy statement:

• The Board of Directors is currently composed of eight members although we expect the number to be reduced to seven at the expiration of Mr. Hundt's term (which concludes at the Annual Meeting, as a result of Mr. Hundt's decision not to stand for re-election). Our Board of Directors has determined that Messrs. Goldman, Hundt, Hooshmand, Koen and Redfield and Dr. Maydan qualify as independent directors in accordance with the published listing requirements of the NASDAQ Stock Market ('NASDAQ'). The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director nor any of his family members has engaged in various types of business dealings with us. In addition, as further required by the NASDAQ rules, the Board of Directors has made a subjective determination as to each independent director that no relationships exist which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, the directors reviewed and discussed information provided by the directors and us with regard to each director's business and personal activities as they may relate to us and our management. There are no family relationships among our executive officers and directors.
  

Alexandre Balkanski served as Lead Independent Director until resigning in December 2009.  Hugh Martin resigned at the end of 2009.

The board met a large number of times.  According to the proxy statement, the board met 24 times in 2009. Although characterized as independent, the directors made the following amounts: 

The following table sets forth all of the compensation awarded to, earned by, or paid to the non-employee members of our Board of Directors in fiscal year 2009.