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 2016’s Fortune 500 and using information found in their 2016 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 Deere & Company’s (NYSE: DE) 2016 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 ($)	Nonqualified Deferred Compensation ($)	Total  ($)
Crandall C. Bowles*	135,000	119,966	0	0	254,966
Vance D. Coffman*	140,000	119,966	0	0	259,966
Charles O. Holiday, Jr.**	160,000	119,966	0	0	279,966
Dipak C. Jain*	120,000	119,966	0	20,610	260,576
Michael O. Johanns*	100,000	135,637	0	0	235,637
Clayton M. Jones*	120,000	119,966	0	0	239,966
Joachim Milberg**	120,000	119,966	0	0	239,966
Richard B. Myers**	120,000	119,966	0	0	239,966
Gregory R. Page*	120,000	119,966	0	843	240,809
Thomas H. Patrick**	130,000	119,966	0	0	249,966
Sherry M. Smith*	120,000	119,966	0	2,122	242,088
Dmitri L. Stockton*	50,000	93,441	0	0	143,441
Sheila G. Talton*	50,000	93,441	0	0	143,441

 

*Up for reelection

**Retiring/Not standing for reelection

***Brian M. Krzanich is a 2016 nominee to the board and is therefore not listed in this chart 

Director Compensation. During fiscal year 2015, Deere held five Board of Directors meetings and fifteen committee meetings. Each current director attended at least 75% of the total number of Board and committee meetings on which he or she served, except Joachim Milberg, who attended less than 75% of the Board and committee meetings at which his attendance was required (four absences total due to illness). Overall attendance at such meetings was approximately 96%. Directors are reimbursed for expenses incurred from Board service, including cost of attending Board and committee meetings. Directors may elect to participate in the Nonemployee Director Deferred Compensation Plan, which allows participants to invest in  interest-bearing or equity alternatives. 

Director Tenure. In 2015, Ms. Bowles, who has held her position as a member of the Board from 1990 to 1994 and since 1999, held the longest tenure. Mr. Stockton and Ms. Talton hold the shortest tenures as they joined in 2015. All directors currently sit on other boards: Mr. Allen serves as a director for Whirlpool Corporation; Ms. Bowles serves as a director for JPMorgan Chase & Co.; Mr. Coffman serves as a director for 3M Company and Amgen Inc.; Mr. Jain serves as a director for Northern Trust Corporation, Reliance Industries Limited (India) and Global Logistics Properties Limited (Singapore); Mr. Johanns serves as a director for Burlington Capital Group, LLC; Mr. Jones serves as a director for Cardinal Health, Inc., and Motorola Solutions, Inc.; Mr. Page serves as a director for Eaton Corporation PLC; Ms. Smith serves as a director for Tuesday Morning Corporation and Realogy Holdings Corp.; Mr. Stockton serves as a director for GE Asset Management Inc. and General Electric RSP U.S. Equity Fund; and Ms. Talton serves as a director for OGE Energy Corporation and Wintrust Financial Corporation. 

CEO Compensation. Samuel R. Allen, Deere’s Chairman and Chief Executive Officer since 2010, earned total compensation of $18,701,330 in 2015. He earned a base salary of $1,500,000, stock awards of $5,612,187, option awards of $2,660,623, incentive compensation of $5,519,363, deferred earnings of $2,931,274, and other compensation totaling $477,883. Michael J. Mack, Deere’s President of Global HR and Public Affairs, earned total compensation of $5,724,129 in 2015. He earned a base salary of $675,839, stock awards of $1,285,151, option awards of $596,532, incentive compensation of $2,162,777, deferred earnings of $848,211, and other compensation totaling $182,619. “Other compensation” for officers includes miscellaneous items such as personal use of the company aircraft, financial planning, medical exams, and company contributions to defined contribution plans.