Corporate Governance

The Director Compensation Project: Ford Motor Company

By Todd Penner

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 know as SOX 301.  One can see some of the effects of these rules when looking at the director compensation table from Ford Motor Company (NYSE: F) 2010 proxy statement.  The proxy statement shows the directors were compensated accordingly:

*Reflects grants of restricted shares of common stock awarded under a consulting agreement with Mr. Ford 

Director Compensation.  During fiscal year 2009, Ford held fifteen Board of Director 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.  In 2009, the Board voluntarily agreed to forgo the cash portion of the annual fees.  The Director's fees were credited to each director's account under the Deferred Compensation Plan for Non-Employee Directors, which is maintained in common stock units. 

Director Tenure.  In 2009, Mr. Hockaday, who has held his position as a member of the Board of Directors since 1987, held the longest tenure.  Mr. Ford and Ms. Ellen R. Marram each have held positions on the Board since 1988.  Mr. Butler is also a director at Cooper Industries and ConAgra Foods, Inc.  Ms. Marram also sits on the Board of The New York Times Company and Eli Lilly and Company.  The remaining Directors each sit on various other Boards. 

CEO Compensation.  Mr. Alan Mulally was hired as Ford's President and Chief Executive Officer on September 1, 2006 and earned $17,916,654 in total compensation during the 2009 fiscal year.  This represented a thirty-percent reduction in Mr. Mulally's salary in 2009.  Mr. Mulally's compensation includes personal use of company aircrafts, cell phones, car and driver service, personal use of company season tickets to athletic events, and company club memberships.  Mr. L.W.K. Booth, Executive Vice President and Chief Financial Officer of Ford, received $3,826,187 in total compensation in 2009.  This compensation plan includes $1,382,493 in increased pension value and deferred compensation earnings.

Full post as published by The Race to the Bottom on July 07, 2010 (boomark / email).