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 2017’s Fortune 500 and using information found in their 2017 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 Costco (NASDAQ: COST) 2017 proxy statement. According to the proxy statement, the company paid the directors the following amounts:

Name

Fees Earned or Paid in Cash

($)

Stock Awards

 ($)

All Other Compensation

($)

Total

($)

Susan L. Decker

42,000

332,012

 

374,014

Daniel J. Evans

44,000

332,012

 

376,014

Hamilton E. James

35,000

332,012

 

367,014

Richard M. Libenson*

35,000

332,014

338,408

705,422

John W. Meisenbach

35,000

 

332,012

 

367,014

Charles T. Munger

45,000

332,012

 

377,014

Jeffrey S. Raikes

38,000

332,012

 

370,014

Jill S. Ruckelshaus

17,000

332,014

 

349,014

James D. Sinegal

35,000

332,012

 

367,014

John W. Stanton**

31,789

238,382

 

270,171

Mary Agnes (Maggie) Wilderotter

34,982

332,012

 

336,996

*Richard M. Libenson has been engaged as a consultant to the Company. For such services, a corporation that he owns was paid $300,000 during fiscal 2016. That amount has been unchanged for 16 years. In addition, the Company paid premiums on long-term disability insurance in the amount of $8,331 and premiums for health care insurance in the amount of $20,101. Mr. Libenson is not standing for re-election. He will serve a three-year term as Director Emeritus beginning in January 2017. For that service he will receive compensation (including equity compensation) equivalent to that received by board members.

**John W. Stanton was elected to the board in late October 2015 and only served a portion of the fiscal year in 2016.

Director Compensation. During the 2016 fiscal year, Costco held five board of director meetings. Each current director attended 100% of the total number of board and committee meetings on which he or she served, with the exception of Mr. Evans, who missed one Board meeting. Non-employee directors earn $30,000 per year for serving on the board and $1,000 for each Board and committee meeting attended. This year, directors also received 2,150 restricted stock units. Directors are reimbursed for travel expenses incurred from board service.

Director Tenure. Mr. Meisenbach and Mr. Sinegal are the longest serving board members as they joined the board at the company’s inception. Mr. Stanton and Ms. Wilderotter began their board tenure in 2015 and have served for the shortest amount of time. Seven board members hold board positions with other companies. Ms. Decker serves as a director for Berkshire Hathaway Inc. and Vail Resorts, Inc. Mr. Evans is the chairman of Daniel J. Evan Associates. Mr. James acts as the President and Chief Operating Officer of The Blackstone Group. Mr. Meisenbach is the President and CEO of MCM, a financial services company. Mr. Munger is Vice Chairman of the Board of Directors for Berkshire Hathaway Inc. and a chairman for the Daily Journal Corporation. Mr. Stanton is the Chairman of First Avenue Entertainment LLLP, Trilogy International Partners, and Trilogy Equity Partners. Ms. Wilderotter serves on the board of Juno Therapeutics, Inc. and Hewlett Packard Enterprise. She also holds a position on the President’s Commission on Enhancing National Cybersecurity.

Executive Compensation. W. Craig Jelinek, Costco’s President, Chief Executive Officer and Director since 2015, earned the highest compensation with a total of $6,503,276 in 2016. He earned a base salary of $700,000, stock awards of $5,563,064, bonus compensation of $81,600, deferred earnings of $57,227, and other compensation totaling $101,385. Jeffrey H. Brotman, the Chairman of the Board, earned $650,000 in base salary, stock awards of $5,563,064, bonus compensation of $81,600, deferred earnings of $78,842, and other compensation comprised of $108,248. In total, Mr. Brotman earned $6,481,745, the second highest amount of compensation. Other compensation included personal benefits such as executive life insurance, health care insurance premiums, and Company matching contributions to deferral plans.