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Corporate Governance

: The Race to the Bottom

The Director Compensation Project: American Express

By Sean Harrell

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This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation. We are including companies from 2007’s Fortune 100 and using information disclosed in each company's 2008 proxy statements. In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence. Meeting stock exchange requirements is mandatory for most listed companies.

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 $100,000 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, 4200(a)(15), 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 American Express’s (AXP-NYSE) 2008 proxy statement.

Name	Fees earned	Stock	Option	Change in		All Other		Total ($)
	or paid	Awards	Awards	Pension		Compensation
	in cash	($)(2)	($)(3)	Value and		($)(5)
	($)(1)			Nonqualified
				Deferred
				Compensation
				Earnings
				($)(4)
Mr. Akerson	110,000	122,840	-		87,018		25,782	345,640
Ms. Barshefsky	80,000	122,840	-		-		208	203,048
Ms. Burns	90,000	133,568	-		-		19,010	242,578
Mr. Chernin	80,000	180,690	-		6,062		208	266,960
Mr. Jordan	90,000	122,840	-		205,928		1,189	419,957
Mr. Leschly	100,000	122,840	-		99,719		36,328	358,887
Mr. Levin	87,500	208,931	-		1,669		208	298,308
Mr. McGinn	90,000	122,840	-		-		320	213,160
Mr. Miller	85,000	133,568	-		-		25,511	244,079
Mr. Popoff	95,000	122,840	-		61,095		893	279,828
Mr. Reinemund	62,500	208,931	-		-		208	271,639
Mr. Walter	95,000	122,840	-		6,905		16,770	241,515
Mr. Williams	87,500	208,931	-		-		208	296,639

Director Compensation. American Express’s board met twelve times last year. Each director was present for seventy-five percent or more of the meetings. Although only two directors received $100,000 or more in director’s fees paid in cash, as a group, the non-employee directors averaged $283,249 in total compensation. Akerson, Jordan, and Leschly all received well over $300,000. Much of the directors’ compensation came in the form of stock awards and other compensations, which the exchange rules consider director’s fees.

Director Tenure. The average tenure of a director at American Express is just under five and a half years. The average tenure does not include Jordan and Popoff, who reached mandatory retirement age of seventy-two. Both men will serve as advisors to the Board following their retirement. Mr. Akerson is currently serving as managing director for The Carlyle Group, and is a director at Manor Care, MultiPlan, and Freescale Semiconductor.

CEO Compensation. CEO, K.I. Chenault, received $26,249,876 in total compensation for 2007. This amount included $1,238,461in base salary. Chenault received $1,074,913 for “other compensation,” which included personal use of company aircraft at $323,884 and a home security system for $126,992. Nearly eighty percent of his compensation came from stock and options awards of $14,764,544, and bonus pay of $6 million.

Full post as published by The Race to the Bottom on April 28, 2008 (boomark / email).