The Director Compensation Project: JPMorgan Chase

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation. We are including companies from 2007’s Fortune 100 and using information found in their 2008 proxy statements. In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence. While substantially the same, there are some minor differences between NYSE and NASDAQ rules that are worth noting.

Under NYSE Rule 303A.01, all listed companies must have a majority of independent directors sitting on their boards. Directors are not independent if they received over $100,000 in direct compensation, other than director’s fees, in any one year period over the last three years pursuant to Rule 303A.02(b)(ii). (The NYSE recently increased this amount to $120,000).  This is a looser restriction than the equivalent NASDAQ Rule, 4200(a)(15), which includes all compensation. Rule 303A.06 requires that, in addition to the general independence standards, audit committee members must comport with the requirements of Exchange Act Rule 10A-3 (C.F.R. §240.10A-3), also known as SOX 301.

One can see some of the effects of these rules when looking at the director compensation table from JPMorgan Chase & Co. (JPM-NYSE) 2008 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 ($)
John H. Biggs(a)	35,417	170,000	0	0	205,417
Crandall C. Bowles	85,000	170,000	0	0	255,000
Stephen B. Burke	75,000	170,000	0	0	245,000
David M. Cote(b)	37,500	0	0	0	37,500
James S. Crown	90,000	170,000	0	0	260,000
Ellen V. Futter	75,000	170,000	0	0	245,000
William H. Gray, III	96,667	170,000	0	0	269,265
Laban P. Jackson, Jr.	100,000	170,000	0	0	270,000
John W. Kessler(a)	31,250	170,000	0	0	201,250
Robert I. Lipp (c)	0	0	0	0	0
Richard A. Manoogian(a)	35,417	170,000	0	0	205,417
David C. Novak	90,000	170,000	0	0	260,000
Lee R. Raymond	90,000	170,000	0	0	260,000
William C. Weldon	75,000	170,000	0	0	245,000

(a)Compensation amount reflects fees earned through retirement date.
(b)Compensation amount reflects mid-year appointment to the board.
(c) A s Senior Advisor, Mr. Lipp does not receive director compensation but instead is paid a base salary of $500,000, a cash award of $1,625,000, and received other compensation in stock.

Director Compensation. JPMorgan Chase’s board met nine times last year. All of the directors attended at least 75% of the meetings of the board. None of the thirteen non-employee directors received more than $100,000 in director’s fees paid in cash. Excluding directors who retired or were appointed mid-year, non-employee directors as a group averaged $256,585 in total compensation for their services. Slightly over 66% of their total compensation came in the form of stock awards, which are considered director’s fees for purposes of complying with exchange rules.

Director Tenure. Half of the non-employee directors have served on the board for ten years or more, the other half has served for six years or less. Lee Raymond has the longest tenure at twenty years. Several directors also sit on other boards. Mrs. Bowles, a director since 2006, sits on the boards of Springs Industries, Springs Global Participacoes S.A., Deere & Company, African Wildlife Foundation, and the Maya Angelou Research Center on Minority Health.

CEO Compensation. James Dimon, who is CEO, and Chairman, received $27,797,275 in total compensation for 2007. Of Mr. Dimon’s total compensation, $15,500,000 came in the form of cash, $14,500,000 of that was as a cash incentive “bonus.” Mr. Dimon received significant stock and options awards ($ 11,909,743 ) including non-discretionary awards as a result of options originally granted under Bank One. Approximately 1.25% of Mr. Dimon’s compensation came in the form of "other compensation. ”