Director's Compensation Project: Barnes and Noble, Inc.

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 (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 Barnes and Noble, Inc. (NYSE:BKS) 2011 proxy statement. According to the proxy statement, Barnes and Noble paid its non-management directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
George Campbell Jr.	243,750	94,510	0	0	338,260
William Dillard, II	255,000	94,510	0	0	349,510
David G. Golden	156,117	94,510	0	0	250,627
Patricia L. Higgins	324,617	94,510	0	0	419,127
Irene R. Miller	63,185	94,510	0	0	157,695
Margaret T. Monaco*	245,000	94,510	0	0	339,510
David A. Wilson	162,604	94,510	0	0	257,114

*The term of Margaret T. Monaco expired on October 28, 2011 at the Annual Meeting of Stockholders.

Director Compensation. During 2011, Barnes and Noble held 22 Board of Directors meetings and 28 Board Committee meetings.  Each director attended at least 90% of the meetings of the Board of Directors and 75% of the meetings of the Board Committees on which he or she served. Non-employee directors received a retainer of $50,000. In addition, each director received a cash retainer between $10,000 and $25,000 for serving on various Board Committees. Chairs of these committees were given an additional retainer of $10,000 or $17,500. In 2011, each non-employee director, except Irene R. Miller, received $20,000 per month for exploration of strategic alternatives for the company. Patricia L. Higgins received an additional $5,000 per month for serving as the chair of this special exploration committee. All directors were reimbursed for any travel-related expenses they incurred as a result of their attendance at Board meetings.

Director Tenure.  Barnes and Noble, Inc. has a staggered Board of Directors. Nine of the eleven directors are divided into three groups, while the remaining two directors are elected by Series J Preferred Stock holders. Leonard Riggio, as founder of the company and Chairman of the Board since 1986, has the longest tenure. Mr. Riggio served as the Chief Executive Officer in addition to Chairman of the Board from 1986 to 2002. Many of the directors sit on other Boards of Directors.  George Campbell Jr. serves as a director of Con Edison, Inc., MITRE Corp., and the Josiah Macy Jr. Foundation. Campbell iss a trustee of Rensselaer Polytechnic Institute, Montefiore Medical Center, Woodrow Wilson National Fellowship Foundation, and the Institute for International Education.  

Executive Compensation. William J. Lynch, Jr., Barnes and Noble’s Chief Executive Officer, received a total compensation of $1,603,181 for the 2011 fiscal year. As part of the company’s performance-based incentive compensation, named executives are eligible for a sliding-scale bonus if the company reaches 84% of the goal set for the year. For 2011, Barnes and Noble failed to reach this goal and, therefore, the executives were not entitled to a bonus. However, the Compensation Committee determined the failure was due to factors outside of the executives’ control and awarded discretionary bonuses to executives. Lynch was awarded a bonus of $675,000. Lynch was also given a car allowance of $18,000. The proxy statement also disclosed the use of a jet owned by LR Enterprises Management LLC, a company owned by Leonard Riggio, but the statement did not specify which of the executives or directors were entitled to its use.