Corporate Governance

The Director Compensation Project- Wal-Mart Stores, Inc.

By Thomas Saunders

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 Wal-Mart Stores, Inc.'s (NYSE:WMT) 2010 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:

Director Compensation.   During fiscal year 2010, Wal-Mart held a total of five meetings to review significant developments affecting the company, engage in strategic planning, and act on matters requiring Board approval.  During fiscal year 2010, each director attended at least 75% of the aggregate of the number of Board meetings and the number of meetings of Board Committees on which he or she served. The Non-Management Directors and Independent Directors meet regularly in executive sessions.

Director Tenure.   Mr. Walton, having been on the board since 1978, is the longest tenured member.  Mr. Reinemund also serves as a director for Exxon Mobile, American Express, and Marriot.  In keeping with this trend, 11 of the members of the board serve as directors at various different private companies, public companies, or non-profit organizations.

CEO Compensation.   Michael T. Duke, who served in various capacities since coming to the company in 1995, was appointed CEO and President in 2009.  Mr. Duke's total compensation in 2010 was $19,234,268, down from $28,396,605 in 2009.  The decrease was mostly a result of the decline in the value of stock awards between the two years. 

Full post as published by The Race to the Bottom on December 24, 2010 (boomark / email).