Director Compensation Project: Chevron Corporation

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation. We are including companies from 2009’s Fortune 100 and using information found in their 2009 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 $120,000 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, 5605(a)(2), 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 the Chevron Corporation (CVX-NYSE) 2009 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 ($)
Samuel H. Armacost	126,000	130,372	-	10,988	267,360
Linnet F. Deily	119,000	113,006	-	5,988	234,994
Robert E. Dennham	116,000	127,674	-	10,988	254,662
Robert J. Eaton	-	130,372	133,776	17,803	261,951
Sam Ginn	116,000	130,372	-	10,988	257,360
Enrique Hernandez, Jr.	7,089	10,011	-	10,988	257,360
Franklyn G. Jenifer	116,000	130,372	-	20,788	267,160
James L. Jones	68,956	103,371	-	577	172,904
Sam Nunn	126,000	130,372	-	12,553	268,925
Donald B. Rice	116,000	113,006	-	10,988	239,994
Kevin W. Sharer	116,000	103,371	-	988	220,359
Charles R. Shoemate	-	130,372	113,776	5,803	249,951
Ronald D. Sugar	116,000	121,253	-	5,988	243,241
Carl Ware	116,000	130,372	-	10,988	257,360

Director Compensation. Chevron’s board met eight times in 2008. All directors attended at least 85% of the board meetings. Only four directors received less than $116,000 in direct cash compensation. Non-management directors averaged $246,684 in total compensation for 2008, while stock awards comprised approximately 46% of director compensation.

Director Tenure. Half of Chevron’s fourteen directors have served on the board since at least 2001. Samuel Armacost has the longest tenure, serving on the board since 1982. Several directors serve on other boards. Ms. Linnet Deily serves on the board of the Honeywell Company, while director Sam Nunn, a former US Senator from Georgia, serves on the boards of the Coca-Cola Company, Dell, Inc., and General Electric Company.

CEO Compensation. Mr. O’Reily serves as Chairman and CEO of Chevron. In 2008, his total compensation was $19,271,249. His compensation included a $1,650,000 salary, stock awards worth $8,079,218, and $266,884 in “other compensation.” Within “other compensation” was $93,876 for personal use of the company aircraft, $2,237 in company car usage, and $978 for home security. Mr. O’Reily’s total compensation was considerably down from his 2007 and 2006 compensation, which was $31,543,185 and $31,602,889 respectively. Chevron’s second highest paid employee in 2008 was Executive Vice President G.L. Kirkland. His total compensation amounted to $10,610,169.