The Director Compensation Project: Sara Lee Corporation

This post is part of an ongoing series that examines the compensation paid to independent directors of public companies.  We are using information found in the 2011 proxy statements of the selected companies.

In addition to state standards and Sarbanes-Oxley (“SOX”) requirements, the major U.S. stock exchanges each have their own standards for independence.  While the NYSE and NASDAQ rules are substantially the same, there are some minor differences between the two that are worth noting. 

NYSE Rule 303A.01 requires that each listed company’s board of directors be comprised of a majority of independent directors.  A director is considered independent under NYSE Rule 303A.02(b)(ii) if the director received less than $120,000 in direct compensation, other than director’s fees, in any one year period over the last three years.  The NYSE “direct compensation” standard is less restrictive than the corresponding NASDAQ Rule, 5605(a)(2)(B), which includes "any compensation."

NYSE Rule 303A.06 requires a listed company’s audit committee members to comport with the requirements of Rule 10A-3 (17 C.F.R. § 240.10A-3).  SOX Section 301 imposes similar requirements.

One can see some of the effects of these rules when looking at the non-management director compensation table from Sara Lee Corporation’s (NYSE:SLE) 2011 Proxy Statement.  According to the proxy statement, Sara Lee paid its non-management directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Christopher B. Begley	78,750	123,758			202,508
Crandall C. Bowles	75,000	120,007			195,007
Virgis W. Colbert	75,000	120,000		12,500	207,500
James C. Crown	156,875	235,035			391,910
Laurette T. Koellner	85,000	130,016		11,250	226,266
Cornelis J.A. van Lede	78,750	123,758		72,655	275,163
Dr. John McAdam	75,000	120,000			195,000
Sir Ian Prosser	83,750	128,758			212,508
Norman R. Sorensen	75,000	120,000			195,000
Jeffrey W. Ubben	78,750	123,758			202,508
Jonathan P. Ward	80,000	125,017		10,000	215,017

Director Compensation.  During fiscal year 2011, Sara Lee held 13 Board of Directors meetings and 25 Board Committee meetings.  Each director attended at least 75% of the aggregate number of meetings of the Board of Directors and meetings of the Board Committees on which he or she served.

Each of Sara Lee’s non-management directors receives an annual cash retainer, they can elect to receive all or a portion of that retainer as common stock or restricted stock units.  Restricted stock units vest one year after the date of the grant, but do not get converted into shares of common stock until six months after the director leaves the board.  Under Sara Lee’s 1999 Non-Employee Director Stock Plan, non-employee directors have the option of deferring all or a portion of their annual retainer into a non-qualified, unfunded deferred compensation program.  All amounts deferred earn a return equal to a five-year interest-bearing account or a stock equivalent account.  All deferred amounts, dividend equivalents, accrued interest, and appreciation are paid out in cash or common stock, as elected by each director and on dates selected by each director.

Each non-management director’s other compensation amount includes the aggregate value of all charitable contributions made by Sara Lee on behalf of the Director during the fiscal year, up to a maximum of $15,000 per calendar year.  Sara Lee also allows its non-management directors to participate in Sara Lee’s Matching Grants Program, under which the Sara Lee Foundation matches personal contributions to eligible nonprofit organizations up to $10,000 per calendar year.  In fiscal year 2011, Sara Lee made charitable contributions on behalf of Ms. Koellner in the amount of $5,000 and Mr. Colbert in the amount $12,500, and also made matching contributions with respect to Ms. Koellner in the amount of $6,250 and Mr. Ward in the amount of $10,000.

Mr. van Lede’s other compensation amount includes an annual retainer of $72,655 for serving as Chairman of the Supervisory Board of one of Sara Lee’s Dutch subsidiaries, Koninklijke Douwe Egberts B.V., during fiscal year 2011.

Director Tenure.  Mr. Crown, on Sara Lee’s Board of Directors since 1998, holds the longest tenure of the non-employee directors; Mr. Ubben joined the Board of Directors in August 2008 and holds the shortest tenure of non-employee directors.  Several directors also sit on other boards.  Ms. Bowles sits on the boards of Deere & Company and J.P. Morgan Chase & Co.  Mr. Colbert is also a director of Bank of America Corporation, Lorillard, Inc., The Manitowoc Company, Inc. and Stanley Black & Decker, Inc.

Executive Compensation. 

CEO – Marcel H.M. Smits became Sara Lee’s Chief Executive Officer on January 28, 2011 after serving as Sara Lee’s Interim Chief Executive Officer since May 2010.  Mr. Smits received $5,668,902 in total compensation during the 2011 fiscal year, an increase of approximately 81% over the prior year.  Mr. Smits’ compensation consisted of $736,347 in base salary, $3,000,026 in stock awards, $1,000,005 in option awards, $659,218 in non-equity incentive plan compensation, and $273,305 in all other compensation.  Mr. Smits’ other compensation amount included $37,512 in expenses associated with Mr. Smits’ relocation and expatriation from The Netherlands to the United States, a $26,508 automobile allowance, and a total of $91,018 in housing allowances and incremental product discounts not available to Sara Lee’s general employees.

CFO – Mark A. Garvey, Sara Lee’s Chief Financial Officer, received $2,130,566 in total compensation during the 2011 fiscal year, an increase of approximately 9% over the prior year.  Mr. Garvey’s compensation consisted of $393,473 in base salary, $750,014 in stock awards, $250,005 in option awards, $271,745 in non-equity incentive plan compensation, $13,231 in valuation changes in deferred compensation earnings, and $452,098 in all other compensation.  Mr. Garvey’s other compensation amount included a $14,165 automobile allowance and $349,109 in United States tax payments Sara Lee made on Mr. Garvey’s behalf because he was tax equalized in the United States during his expatriate assignment to The Netherlands.

Comments

[George E. Bourguignon, Jr., Attorney]

Congrats on making the ABA Journal's fifth annual top 100 law blog list!

[Poster Printing]

I never thought that Sarah Lee is a huge company! Wow! I've been a Sarah Lee user since 2000. -Sarah-