The Director Compensation Project: Bank of America

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 the Bank of America (NYSE:BAC) 2010 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Susan S. Bies	71,672	143,344	0	0	215,016
William P. Boardman	71,672	143,344	0	0	215,016
Frank P. Bramble, Sr.	97,918	160,000	0	0	257,918
Virgis W. Colbert	99,944	199,888	0	0	299,832
Charles K. Gifford (3)*	90,028	160,000	0	1,537,166	1,787,194
Charles O. Holliday, Jr.	48,000	96,000	0	0	144,000
D. Paul Jones, Jr.	71,672	143,344	0	0	215,016
Monica C. Lozano	97,918	160,000	0	0	257,918
Walter E. Massey	167,00	333,000	0	0	500,000
Thomas J. May	110,000	160,000	0	0	270,000
Donald E. Powell	71,672	143,344	0	0	215,016
Charles O. Rossotti	114,986	199,888	0	0	314,874
Thomas M. Ryan	100,000	160,000	0	0	260,000
Robert W. Scully	54,792	109,584	0	0	164,376
William Barnet, III*	80,000	160,000	0	0	240,000
John T. Collins*	80,000	160,000	0	0	240,000
Gary L. Countryman*	80,000	160,000	0	0	240,000
Tommy R. Franks*	80,000	160,000	0	0	240,000
Patricia E. Mitchell*	80,000	160,000	0	0	240,000
Joseph W. Prueher*	99,944	199,888	0	0	299,832
O. Temple Sloan, Jr.*	130,000	160,000	0	0	290,000
Meredith R. Spangler*	0	0	0	0	0
Robert L. Tillman*	80,000	160,000	0	0	240,000
Jackie M. Ward*	100,000	160,000	0	0	260,000

*Compensation amount reflects fees earned through retirement date. 

Director Compensation.  Bank of America offers an annual $80,000 cash award for nonemployee directors along with a restricted stock award of $160,000. The stock award is subject to a one year vesting requirement. Non-employee directors may elect to defer any compensation through the Director Deferral Plan. Additional retainers are offered for the chairman of the Audit, Compensation and Benefits, Corporate Governance, Credit and Enterprise Risk Committees.  Bank of America had 34 Board Meetings in 2009; directors were expected to attend at least 75% of these meetings. Moreover, all of the directors, with the exception of one, were in attendance at the Annual Meeting of Stockholders. Additionally, during 2009, the CEO held 15 telephonic Board information sessions.

Director Tenure.  Mr. May and Mr. Gifford have both been on the Board since 2004 and hold the longest tenure. Mr. Lewis served as the sole employee director in 2009, without compensation, and retired from the Board on December 31, 2009. Mr. Lewis was succeeded as employee director by Mr. Moynihan. The Corporate Governance Committee reduced and fixed the Board at 13 members and in 2009 named the nominees in the Proxy statement along with 6 candidates for election for the first time: Mr. Bies, Mr. Boardman, Mr. Holliday, Mr. Jones, Mr. Powell and Mr. Scully. Of the 13 directors, 8 currently sit on other boards. Mr. Moynihan is also a director at Merrill Lynch & Co., Inc.  Mr. May is a director at NSTAR.  Mr. Gifford is a director at CBS Corporation.

CEO Compensation.  Kenneth Lewis served as CEO during 2009 and effective January 1, 2010 Mr. Moynihan took over as CEO. In light of Bank of America’s participation in TARP Mr. Lewis agreed to forego any compensation or incentives in 2009. Although the Special Master approval plan does not govern compensation determinations for Mr. Curl or Mr. Moynihan, the company agreed to keep these individuals’ compensation consistent with the Special Master approach required for Mr. Price and Mr. Montag. Mr. Price’s annual cash salary decreased from $800,000 to $500,000 and Mr. Montag’s salary decreased from $600,000 to $500,000 effective November 1, 2009; however, both Mr. Price and Mr. Montag received stock salary awards determined by the Special Master. During 2009 Mr. Price’s total compensation was $6,000,000 while Mr. Curl and Mr. Montag received total compensation of $9,900,000. Mr. Moynihan’s base salary is $800,000 with additional stock benefits, with a total compensation of $6,000,000.  Given that Bank of America has repaid its TARP financing, effective January 1, 2010 Mr. Moynihan’s cash salary increased to $950,000 and Mr. Price's and Mr. Montag’s salaries increased to $800,000 each, which better reflects the size and scope of their jobs. Previously, executive directors have had various additional fringe benefits and have received health and welfare stipends. In 2009 a number of those benefits were limited or removed. Specifically, in 2009 the executive officers were no longer allowed to use the corporate aircraft for personal use and they were limited to $25,000 in “other” compensation.