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Corporate Governance

: The Race to the Bottom

The Director Compensation Project: Time Warner

By Greg Lebouton

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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 know as SOX 301.

One can see some of the effects of these rules when looking at the director compensation table from Time Warner (TWX-NYSE) 2008 proxy statement.

Name	Fees Earned or Paid in Cash		Stock Awards (1)(2)		Option Awards (3)(4)		Non-Equity Incentive Plan Compensation	Change in Pension Value and Nonqualified Deferred Compensation Earnings(5)	All Other Compensation(6)		Total
James L. Barksdale	$	100,000	$	97,333	$	60,450	—	—		—	$	257,783
Stephen F. Bollenbach(5)	$	100,000	$	97,333	$	80,823	—	—		—	$	278,156
Frank J. Caufield	$	100,000	$	97,333	$	60,450	—	—		—	$	257,783
Robert C. Clark	$	100,000	$	96,535	$	58,006	—	—		—	$	254,541
Mathias Döpfner(6)	$	100,000	$	46,653	$	51,629	—	—	$	23,052	$	221,334
Jessica P. Einhorn	$	100,000	$	93,189	$	54,688	—	—		—	$	247,877
Reuben Mark(5)	$	100,000	$	97,333	$	60,450	—	—		—	$	257,783
Michael Miles	$	100,000	$	97,333	$	60,450	—	—		—	$	257,783
Kenneth J. Novack	$	100,000	$	95,832	$	60,450	—	—		—	$	256,282
Francis T. Vincent, Jr.	$	100,000	$	97,333	$	60,450	—	—		—	$	257,783
Deborah C. Wright	$	100,000	$	93,189	$	54,688	—	—		—	$	247,877
Edward J. Zander(7)	$	31,230		—	$	66,967	—	—		—	$	98,197

Director Compensation . Time Warner's board met eleven times last year. No incumbent director attended fewer than 75% of the meetings of the Board of Directors. Although the majority of the director’s received $100,000 in director’s fees paid in cash, the non-employee directors as a group averaged $241,098 in total compensation for their services. As can be seen in the table, much of the directors’ compensation came in the form of stock awards and options grants, which are considered director’s fees for purposes of complying with exchange rules.

Director Tenure . On average, Time Warner's non-employee directors have served on the board for just over five years. Michael. Miles is an Independent Director, who has the longest tenure with Time Warner’s board . He was a Director of Historic TW from 1995 until the AOL-Historic TW Merger in January 2001, and has been a Director of the Company since that date. Many of the directors also sit on other boards. For instance, Mr. Miles serves as a director of AMR Corporation, Citadel Broadcasting Corporation and Dell Inc.

CEO Compensation . The compensation paid to the CEO, Richard D. Parsons, was $18,641,003 last year; $1,500,000 of which was paid in cash. $ 509,717 of Mr. Hurd's compensation was "other compensation." This included $382,659 in respect to transportation-related benefits as well as $100,000, club membership dues (to the extent the membership was used for personal purposes), dining service benefits, and monitoring services in connection with a residential alarm system at Mr. Parsons’ residence, which was installed previously in connection with the Company’s security program. Unlike many other public companies, there were no bonuses given to any of the executives in the years of 2006 and 2007.

Full post as published by The Race to the Bottom on May 05, 2008 (boomark / email).