The Director Compensation Project: Sprint Nextel

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 disclosed in each company’s 2008 proxy statements. In addition to state standards and the requirements of SOX, the stock exchanges have each adopted their own standards for director independence. Meeting stock exchange requirements is mandatory for most listed companies.

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). 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 Sprint Nextel’s (S-NYSE) 2008 Proxy Statement. According to the proxy statement, directors were paid the following amounts:

Name	Fees Earned or Paid in Cash	Stock Awards	Option Awards	Non-Equity Incentive Plan Compensation	Change in Pension Value and Nonqualified Deferred Compensation and Earnings	Total
Keith J. Bane	127,000	107,771	—	—	—	240,836
Robert R. Bennett	148,000	138,662	—	—	—	286,662
Gordon M. Bethune	109,000	135,852	—	—	—	245,065
Frank M. Drendel	102,000	107,771	—	—	—	210,312
Larry C. Glasscock	46,167	32,685	—	—	—	78,852
James H. Hance, Jr.	164,625	161,730	—	—	—	330,535
V. Janet Hill	128,000	107,771	—	—	—	236,260
Irvine O. Hockaday, Jr.	202,375	134,078	—	—	—	341,956
Linda Koch Lorimer	117,000	134,078	—	—	—	251,552
Rodney O’Neal	45,167	32,685	—	—	—	77,852
William H. Swanson	156,000	131,974	—	—	—	288,454

Director Compensation: Last year, the board for Sprint Nextel held six regular meetings and fourteen special meetings. All directors attended at least 75% of board meetings. The eleven directors averaged $235,303 in compensation. Since Mr. Glasscock and Mr. O’Neal joined the board on August 7, 2007, they earned significantly less than the other nine directors.

Director Tenure: The outside directors have served for an average of 4.5 years. Linda Lorimer is the longest serving board member, having been on Sprint’s board since March, 1993. Several long-standing Nextel Communications board members joined the Sprint Nextel Board in 2005, when the companies merged.

CEO Compensation: Sprint Nextel’s CEO for most of 2007 was Gary D. Forsee. He was replaced in December by Daniel R. Hesse. Forsee’s total compensation for 2007 was $40,006,629. His base salary was $1,529,915 (3.8% of total compensation), with $23,439,623 (58.5%) from stock and option awards. According to the proxy statement, Forsee did not receive a bonus; however, his non-equity incentive plan, pension plan, and nonqualified deferred compensation earnings totaled $6,739,985 (16.8%). Finally, other compensation totaled $8,297,106 (20.7%). Mr. Forsee had $89,516 of income from personal use of the corporate aircraft and had $4,679 worth of home security equipment and services.