Corporate Governance

The Director Compensation Project - AT&T

By Christina Huszcza

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 AT&T's (NYSE:T) 2010 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:

Director Compensation.  During fiscal year 2009, AT&T held eight Board of Directors meetings and 66 Board Committee meetings. 75% of the Directors attended the Board of Directors meetings and Board Committee meetings. In addition to Board of Directors and Committee meetings, all non-management board members meet in an executive session at least four times a year. Directors who are employees of AT&T or subsidiaries of AT&T receive no additional compensation. All other Directors receive an $85,000 retainer with additional fees paid for meetings attended. Notably, chairpersons of each committee receive an additional $5,000 retainer. The chairpersons of the Audit and Human Resources Committees, however, receive an additional $20,000 retainer. Directors may elect to defer the receipt of these fees into either deferred stock units or into a cash deferral account. Finally, each Director who joined the Board after November 21, 1997, and before September 24, 2004, received an additional annual grant of $13,000 in the form of deferred stock units. The final payouts of this grant were made in 2009.

Director Tenure.  In 2009, Patricia P. Upton held the longest tenure. She has held her position as a member of the Board of Directors since 1993. A director cannot be considered for re-election once they reach the age of 72. Therefore, August A. Busch III and Mary S. Metz cannot be re-elected to the Board of Directors. Many directors also sit on other boards. Mr. Chico is the co-chairman of the Board of Directors for Teléfonos de México and IDEAL and he is the chairman for Carso Global Telecom, S.A. de C.V. Mr. Chico also sits on the Board of Directors for Honeywell International, Inc., Grupo Carso, S.A. de C.V., Carso Global Telecom, S.A. de C.V.; CICSA (Carso Infraestructura y Construction); and Telmex Internacional, S.A.B. Because the Grupo Carso companies are affiliates with one another, the Corporate Governance and Nominating Committee has determined that Mr. Chico's service on these boards should not count toward the Board's limit on outside Board service. Mr. Chico intends to end his service as a Director with Grupo Carso, Carso Global Telecom, and Telmex Internacional in 2010. Mr. Chico is also the director with the shortest tenure, elected in 2008.

CEO Compensation.  Randall L. Stephenson is the CEO, President, and Chairman of the Board of Directors for AT&T. Mr. Stephenson has been CEO since 2007 and has been on the Board of Directors since 2005. In 2008, Mr. Stephenson declined his short-term incentive award, resulting in a compensation package of $15.8 million, $12.7 million less than 2007. In 2009, Mr. Stephenson earned $29,230,506. $1.45 million of this compensation was base salary, while the remaining $27.75 million was performance based. Rafael de la Vega, the President and CEO for AT&T Mobility & Consumer Markets, earned $13,581,036 in compensation, including $800,000 in base salary. The company's total annual cash compensation is in the 62nd percentile when compared to other peer companies.

Full post as published by The Race to the Bottom on December 10, 2010 (boomark / email).