Corporate Governance

Director Compensation Project: Target

By Matthew Ullrich

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation. We are including companies from 2009's Fortune 100 and using information found in their 2009 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 known as SOX 301.

One can see some of the effects of these rules when looking at the director compensation table from Target (TGT-NYSE) 2009 proxy statement. According to the proxy statement, the company paid the directors the following amounts:

* Robert J. Ulrich retired as CEO on May 1, 2008 but stayed on as Chairman of the board until January of 2009.

Director Compensation: Target's board met seven times during 2008. All directors attended at least 75% of the board meetings. Seven directors received zero cash payments but were compensated almost entirely with stock and options. Also, seven out of the twelve directors earned under $300,000 for serving on the board. In addition to directors' total compensation, each director receives a 10% discount on all goods purchased from Target throughout their lifetimes. Non-employee directors also receive $100,000 of accidental life insurance.

Director Tenure: The average tenure of a director is 9.5 years. The longest serving members of the board are Solomon D. Trujillo and Robert J. Ulrich (CEO and Chairman of the Board) who have each served for fifteen years. Several directors also sit on other boards. Roxanne S. Austin, Richard M. Kovacevich, and Anne M. Mulcahy each serve on at least three other boards. Ms. Austin sits on the boards of Abbott Laboratories, Teledyne Technologies Incorporated, and LM Ericsson Telephone Company. Mr. Kovacevich serves on the boards of Wells Fargo & Company, Cargill, Inc., and Cisco Systems, Inc.

CEO Compensation: Robert J. Ulrich, who served as CEO and Chairman of the Board, received $1,056,205 in total compensation for 2008. In May of 2008, he retired from being CEO, but he remained Chairman of the Board for the rest of 2008. Robert J. Ulrich's compensation in 2008 significantly decreased from his two previous years. In 2007, Mr. Ulrich received $12,185,404 in total compensation, while in 2006, he received $36,428,691. Gregg W. Steinhafel became Target's CEO in May of 2008 and Chairman of the Board in February of 2009. In 2008, Mr. Steinhafel received $5,861,417 in total compensation. In 2008, Target's CEOs combined for $6,917,622 in total compensation. Target's CEOs also used the company's plane for a total of $177,491 in 2008. Mr. Ulrich and Mr. Steinhafel's other perks included a company provided car or car allowance, reimbursement of financial management and home security expenses, parking, an on-site exercise room, spousal travel on business trips, gifts, and executive physicals. Their combined perks cost Target $111,882 in 2008. Mr. Ulrich's perks also included $140,500 in local commuting services. Lastly, Mr. Ulrich and Mr. Steinhafel also both received memberships in a downtown business club for an undisclosed amount.

Full post as published by The Race to the Bottom on May 18, 2009 (boomark / email).