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 General Electric Company (NYSE: GE) 2011 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:

 

Name	Fees Earned of Paid in Cash* ($)	Stock Awards ($)	Option Awards** ($)	All Other Compensation*** ($)	Total ($)
W. Geoffrey Beattie	0	278,643	0	34,500	313,143
James I. Cash, Jr.	120,000	182,385	0	50,000	352,385
William M. Castell	62,500	56,962	0	1,000,000	1,119,462
Ann M. Fudge	100,000	151,987	0	39,233	291,220
Susan Hockfield	100,000	151,987	0	5,250	257,237
Andrea Jung	110,000	167,186	0	27,199	304,385
Alan G. Lafley	100,000	151,987	0	50,000	301,987
Robert W. Lane	120,000	182,385	0	0	302,385
Ralph S. Larsen	0	278,643	0	60,022	338,665
Rochelle B. Lazarus	0	253,312	0	50,046	303,358
James J. Mulva	0	278,643	0	75,000	353,643
Sam Nunn	0	278,643	0	34,150	312,793
Roger S. Penske	0	253,312	0	56,344	309,655
Robert J. Swieringa	44,000	234,060	0	48,500	326,560
James A. Tisch	50,000	228,087	0	50,000	328,087
Douglas A. Warner III	120,000	182,385	0	53,054	355,439

*This includes salary and bonus amounts.

**Non-management directors are not entitled to non-equity incentive compensation.

***This column includes the total of nonqualified deferred compensation earnings and change in pension value, payments to employee savings plans, expatriate tax benefits, life insurance premiums and miscellaneous other benefits.

Director Compensation.  During the 2011 fiscal year, the board held 15 meetings, including three meetings of the non-management directors of the board. Every director attended 75 percent or more of the board or committee meetings according to his or her respective membership on each committee. The current compensation and benefit program for non-management directors has been in effect since 2003. During 2011, non-management directors received $250,000 in annual compensation, paid incrementally at the conclusion of each quarter. Forty percent was paid in cash, and 60 percent was paid in deferred stock units. Non-management directors could participate in several equity compensation programs, but they received no other non-equity incentive compensation for their services.

Director Tenure.   All of the current Named Executive Directors have held positions with General Electric for over 25 years, with Mr. Warner holding the longest tenure as a director since 1992. Mr. Tisch has the shortest tenure, having joined the board in 2010. Each director has held numerous high-level leadership positions within the company. Most directors hold positions as directors or trustees in other organizations. For instance, Mr. Lane is a director at both Verizon Communications and Northern Trust Corporation and a member of the supervisory board of BMW AG. Mr. Nunn is a director of The Coca-Cola Company.

CEO Compensation.   As part of his total compensation of $21,581,228 in 2011, Chairman of the Board and Chief Executive Officer Jeffrey Immelt received a $4 million cash bonus in both 2010 and 2011 after meeting or exceeding almost all financial objectives. The remaining Named Executives each received bonuses of at least $2.8 million in 2011. Directors received extensive benefits, such as use of both company aircraft and cars for personal use, financial counseling and tax preparation services, and other miscellaneous benefits, such as home alarm and security systems installation and maintenance. In the 2011 fiscal year, Vice Chairman John Rice received $349,651 in expatriate tax benefits according to the company’s policy regarding employees who are temporarily placed in international assignments and $1,375,186 in total value for the “other benefits” named above.