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Corporate Governance

: The Race to the Bottom

The Director Compensation Project: Goodyear Tire & Rubber

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 Goodyear Tire & Rubber Co.’s (GT-NYSE) 2008 proxy statement.

	Fees Earned or Paid
	in Cash			Stock Awards		All Other		Total
Name	($)			($)(1)		Compensation ($)(2)		($)

Boland		117,867			263,254		38,371		419,492
Breen		109,908			496,487		0		606,395
Firestone(3)		5,707			0		0		5,707
Forsee		0	(4)		311,562		21,949		333,511
Hudson		77,775			409,597		1,076		488,448
McCollough		16,896	(5)		54,901		2,256		74,053
Minter		63,748	(6)		384,740		0		448,488
Morrison		75,000			155,650		1,486		232,136
O’Neal		85,000			201,775		1,593		288,368
Peterson		75,000			187,185		35,422		297,607
Sullivan		82,225			102,388		3,516		188,129
Weidemeyer		82,225			165,727		33,825		281,777
Wessel		75,000			126,963		3,217		205,180

Director Compensation. During 2007, Goodyear’s board held eight meetings. Each director attended at least seventy-five percent of all Board meetings. The non-employee directors as a group averaged $321,965 in total compensation for their services. This figure excludes Mr. Firestone who joined the board in December 2007. As seen in the third column of the table, a large percentage of the directors’ compensation came from stock awards, which are considered director’s fees for purposes of compliance with exchange rules.

Director Tenure. The majority of non-employee directors began serving after 2004, with two directors joining in 2007. The average director tenure is about five years. The longest serving director to date is Steven A. Minter, who started in February 1985. Over half of the directors sit on boards with other companies. For example, James C. Boland serves as director of Invacare Corporation and The Sherwin-Williams Company.

CEO Compensation. Robert J. Keegan, CEO and Chairman, earned $20,451,008 in total compensation, with $1,176,667 from salary. Over $12 million of Mr. Keegan’s total compensation came from performance incentives and bonus based on company performance.

Full post as published by The Race to the Bottom on May 06, 2008 (boomark / email).