The Director Compensation Project: AT&T (T)

This post is part of an ongoing series that examines the way stock exchange independence rules relate to director compensation. We are for the most part including companies from 2015’s Fortune 500 and using information found in their 2015 proxy statements.

NASDAQ and the NYSE have similar rules with respect to director independence. NYSE Rule 303A.01 requires that each listed company’s board of directors be comprised of a majority of independent directors. A director does not qualify as “independent” if he or she has a “material relationship with the company.” NYSE Rule 303A.02(a). In addition, the director is not considered independent under NYSE Rule 303A.02(b)(ii) if the director received more than $120,000 in direct compensation, other than director’s fees, during any of the previous three years. The NYSE imposes a higher independence standard for directors serving on the company’s audit committee by requiring them to comport with Rule 10A-3 (C.F.R. §240.10A-3) (see Rule 303A.06) and requires consideration by the board of directors of certain specified factors in designating directors for the Compensation Committee.  See NYSE Rule 303A.02(a)(ii).

Finally, as the Commission has noted with respect to director independence: 

• All compensation committee members must meet the general independence standards under NYSE’s rules in addition to the two new criteria being adopted herein. The Commission therefore expects that boards, in fulfilling their obligations, will apply this standard to each such director’s individual responsibilities as a board member, including specific committee memberships such as the compensation committee. Although personal and business relationships, related party transactions, and other matters suggested by commenters are not specified either as bright-line disqualifications or explicit factors that must be considered in evaluating a director’s independence, the Commission believes that compliance with NYSE’s rules and the provision noted above would demand consideration of such factors with respect to compensation committee members, as well as to all Independent Directors on the board.

Exchange Act Release No. 68639 (Jan. 11, 2013); see also Exchange Act Release No. 68641 (Jan. 11, 2013).

Independent directors are compensated for their service on the board. The amount of “total compensation” can be seen from examining the director compensation table from the AT&T’s (NYSE: T) 2015 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 ($)
Reuben V. Anderson	200,600	150,000	0	92,803	443,403
James H. Blanchard*	54,467	0	0	306,832	361,299
Jaime Chico Pardo	143,800	150,000	0	15,102	308,902
Scott T. Ford	137,900	150,000	0	102	288,002
Glenn H. Hutchins*	74,217	0	0	26,330	100,546
James P. Kelly	140,000	150,000	0	102	290,102
William E. Kennard*	19,833	0	0	17	19,850
Jon C. Madonna	172,100	150,000	0	102	322,202
Michael B. McCallister	142,000	150,000	0	17,876	309,876
John B. McCoy	151,900	150,000	0	15,102	317,002
Beth E. Mooney	130,600	150,000	0	102	280,702
Joyce M. Roché	157,600	150,000	0	13,646	321,246
Matthew K. Rose	134,600	150,000	0	22,064	306,664
Cynthia B. Taylor	147,400	150,000	0	5,102	302,502
Laura D’Andrea Tyson	144,000	150,000	0	5,600	299,600

*Mr. Blanchard retired from the Board in April 2014. Mr. Hutchins joined the Board in June 2014. Mr. Kennard joined the Board in November 2014.

Director Compensation. The board held ten meetings. Each director attended at least 75% of the total number of board and committee meetings on which he or she served. All directors attended the 2014 Annual Meeting of Shareholders. Non-employee directors receive an annual retainer of $95,000, as well as $2,000 for each board meeting or corporate strategy session attended in person. The Chairman of each committee receives an additional annual retainer of $15,000, except for the Audit and Human Resources committee Chairmen who receive an additional annual retainer of $25,000. The Lead Director receives an additional annual retainer of $60,000. Under AT&T’s Non-Employee Director Stock and Deferral Plan, directors may elect to defer their fees and all or part of their retainers into a cash deferral account or deferred stock units. Non-employee directors also receive an annual grant of fully earned and vested deferred stock units valued at $150,000.

Director Tenure.  All of the directors hold directorships with other organizations. Ms. Roché is the longest serving director, having served since 1998. Mr. Kennard and Mr. Hutchins are the shortest serving directors having joined the board in 2014. Mr. Kennard serves as a director for Duke Energy Corporation, Ford Motor Company, and MetLife, Inc. Mr. McCallister served as a director for Humana Inc. and serves as a director for Fifth Third Bancorp and Zoetis Inc. Ms. Mooney serves as a director for KeyCorp. Ms. Roché serves as a director of Dr Pepper Snapple Group, Inc., Macy’s Inc., and Tupperware Brands Corporation. Mr. Rose serves as a director of BNSF Railway Company, Burlington Northern Sante Fe, LLC, and Fluor Corporation.

CEO Compensation.  Mr. Randall L. Stephenson serves as Chairman, Chief Executive Officer, and President and has been with AT&T since 1982. Previously, he served as Chief Financial Officer from 2001 to 2004 and Chief Operating Officer from 2004 to 2007. In 2014, Mr. Stephenson earned a total of $23,984,315. He received a base salary of $1,691,667, stock awards of $14,248,893, incentive compensation of $4,350,000, deferred compensation of $3,206,277, and other compensation totaling $487,478. Mr. John Stephens, Senior Executive Vice President and Chief Financial Officer, was the second highest compensated AT&T executive. In 2014, he earned a total of $10,711,097. He received a base salary of $765,833, stock awards of $4,294,312, incentive compensation of $1,425,000, deferred compensation of $3,733,775, and other compensation totaling $492,177. Other compensation included personal benefits, Company-paid life insurance premiums, and Company matching contributions to deferral plans for 2014.