The WSJ reported over the weekend that the CEO of Nasdaq, Robert Greifeld, received compensation of over $18 million.  He beneficially owns 2% of Nasdaq and participates in an incentive program that provides for bonuses up to $2 million.  The bonuses are based upon performance, with performance in turn based mostly upon operating income and total revenue.

We thought we would take the time to examine the compensation paid to the directors of Nasdaq.  According to the company's proxy statement, all of the directors are independent except Greifeld.  The directors on the management compensation committee, by the way, included Casey (chair), Gorman, Hutchins, Sodhani, Stemberg & Wince-Smith.  The proxy statement can be found at the DU Corporate Governance web site. 

2006 Director Compensation Table (footnotes and empty columns deleted)

Several observations can be made about this structure.  First, the proxy statement itself noted that directors would not be treated as independent "who accepted any compensation from the company in excess of $100,000 during any period of twelve consecutive months within the three years preceding the determination of independence"  Yet at the same time, the board ignores comparable amounts paid as part of the fee structure, raising serious questions as to whether these directors ought to be treated as independent. 

Second, the compensation of the CEO is largely based upon revenues and share prices.  In that sense, it creates an incentive to maximize earnings and profits.  While an ordinary standard for "for profit" companies, Nasdaq also has a regulatory mission, including the enforcement of listing standards.  This salary structure does not take into account this regulatory mission at all and puts and emphasis on factors that are largely inconsistent with the regulatory mission.