Corporate Governance

The Director Compensation Project: Bank of America

By Scott James

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 have each adopted their own standards for director 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 Bank of America Corporation’s (BAC-NASDAQ) 2008 Proxy Statement.

Director Compensation

Only one director received a cash award greater than $100,000. On average, however, the directors received $306,855 in total compensation. The majority of the director’s compensation consisted of stock awards, averaging $187,647. In 2007, the board met nine times, with an attendance rate of seventy-five percent, with the exception of Mr. Bramble.

Director Tenure

The average tenure of the directors at Bank of America is just over six years, although four directors served on the board for ten years or more, and Ms. Meredith Spangler has been on the board for over twenty years. Nine out of fifteen directors served on at least one other board, while four of fifteen served on two or more boards. Ms. Jackie Ward currently serves on five other boards, in addition to Bank of America.

CEO Compensation

In 2007, CEO Kenneth Lewis received $16,432,999 in total compensation, with only $1,500,000 in the form of direct salary. The majority of Mr. Lewis’ compensation was in the form of stocks awards, and performance incentives, together totaling $8,505,012. Mr. Lewis also received $212,211 of compensation classified as “all other compensation” which includes use of the company aircraft, secured parking, and home security system.

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