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 2011’s Fortune 500 and using information found in their 2011 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.  NYSE Rule 303A.06 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).

Independent directors are compensated for their service on the board.  The amount of compensation can be seen from examining the director compensation table from the ConocoPhillips (NYSE: COP) 2011 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 ($)
Richard L. Armitage	115,000	170,012	--	--	285,012
Richard H. Auchinleck	150,345	170,012	--	13,639	333,996
James E. Copeland, Jr.	135,000	170,012	--	25,358	330,370
Kenneth M. Duberstein	115,000	170,012	--	26,213	311,225
Ruth R. Harkin	125,000	170,012	--	7,000	302,012
Mohd H. Marican***	10,208	--	--	--	10,208
Harold W. McGraw III	120,375	170,012	--	--	290,387
Robert A. Niblock	122,500	170,012	--	15,000	307,512
Harald J. Norvik	122,924	170,012	--	16,200	309,136
William K. Reilly	115,000	170,012	--	16,859	301,871
Bobby S. Shackouls	47,917	170,012	--	21,778	239,707
Victoria J. Tschinkel	122,500	170,012	--	10,164	302,676
Kathryn C. Turner	120,000	170,012	--	15,000	305,012
William E. Wade, Jr.	130,441	170,012	--	5,000	305,453

*This includes voluntary deferrals to ConocoPhillip’s Key Employee Deferred Compensation Plan.

**This column includes directors’ personal use of company aircraft and automobiles, a home security system, annual physicals, life insurance premiums and tax reimbursements.

***Mr. Marican was elected to the board in December 2011, and the amounts in the table represent his prorated compensation for December 2011 only.

 

Director Compensation.  During the 2011 fiscal year, the board of directors met 10 times. Each director attended at least 75 percent of the aggregate of the total number of board meetings and the total number of meetings held by all board committees on which he or she served. The Human Resources and Compensation Committee is responsible for determining performance-based standards for all Senior Officers, including all Named Executive Officers. The executive compensation program utilizes a number of measurement methods, such as comparisons to marketplace compensation, pay equity within the company, and the skills and experience of individual executives, resulting in a unique compensation package for each individual.

Director Tenure.  Directors Duberstein, Harkin, Reilly, Turner, and Tschinkel concurrently hold the title of longest tenure on the board, each having begun their tenure in August 2002. Mr. Marican is the newest director, having joined the board in December 2011. A number of directors also hold membership on other boards. For example, Mr. Copeland serves on the boards of Equifax and Time Warner Cable. Mr. Duberstein sits on the boards of Dell Inc.; The Boeing Company; Mack-Cali Realty Corporation; and The Travelers Companies, Inc.

CEO Compensation.  James Mulva, who has served as ConocoPhillips’ Chief Executive Officer since 2002, earned $27,713,594 during the fiscal year. Mr. Mulva became eligible for retirement on December 31, 2011, and he intends to retire in 2012, provided that the company’s planned repositioning occurs before the 2012 annual meeting. Mr. Mulva received access to company aircraft and automobiles for both personal and business use, accruing $15,298 worth of automobile expenses during 2011, but he reimbursed the company for certain personal uses of these assets. Mr. Mulva and Al Hirshberg, Vice President of Planning and Strategy, both received company-paid premiums of life insurance policies and reimbursements for taxes accrued. Mr. Hirshberg received $9,934,084 in total compensation in 2011. Furthermore, Mr. Hirshberg received $113,761 in relocation expenses as an incentive to accept the company’s offer of employment, consistent with the company’s policy on paying relocation costs for executives.