The Director Compensation Project: Bank of America 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 receive 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, 5606(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 Bank of America’s 2009 proxy statement. According to the proxy statement, the company paid the directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Other Stock Based Accounting Adjustments ($)	Total Stock Awards ($)	All Other Compensation ($)	Total ($)
William Barnet, III	80,000	160,000	0	160,000	0	240,000
Frank P. Branble, Sr.	80,000	160,000	(112,624)	47,376	0	127,376
John T. Collins	80,000	160,000	(98,882)	61,118	0	141,118
Gary L. Countryman	0	240,000	(112,624)	127,376	0	127,376
Tommy R. Franks	80,000	160,000	(112,624)	47,376	0	127,376
Charles K. Gifford*	0	240,000	(112,624)	127,376	1,504,020	1,631,396
W. Steven Jones**	0	0	(13,742)	(13,742)	0	(13,742)
Monica C. Lozano	80,000	160,000	(112,624)	47,376	0	127,376
Walter E. Massey	80,000	160,000	(112,624)	47,376	0	127,376
Thomas J. May	0	270,000	(112,624)	157,376	0	157,376
Patricia E. Mitchell	80,000	160,000	(112,624)	47,376	0	127,376
Thomas M. Ryan	0	260,000	(112,624)	147,376	0	147,376
O. Temple Sloan, Jr.	130,000	160,000	0	160,000	0	290,000
Meredith R. Spangler	0	240,000	(112,624)	127,376	0	127,376
Robert L. Tillman	80,000	160,000	(112,624)	47,376	0	127,376
Jackie M. Ward	0	260,000	(112,624)	147,376	0	147,376

*Mr. Gifford entered into a Retirement Agreement effective until January 31, 2010. Under the agreement, Mr. Gifford provides consulting services.  The amount listed in "other compensation" includes: "(i)$50,000 in consulting fees; (ii)$947,682 in aircraft usage (which is the amount paid to a third party vendor); and (iii)$225,031 in office and administrative support."

**Mr. Jones is retired from the Board of Directors.

Director Compensation Bank of America had seventeen directors in 2008. The board met thirteen times. Each director attended at least 75% of the meetings. The board included only one employee director, Ken Lewis, who was not compensated for his service on the board. The non-employee directors each received a cash award of $80,000 plus restricted stock of $160,000. Under the Direct Deferral Plan, each independent director was given the option of converting all or part of the cash award into stock. Of the fifteen active directors, six elected to convert all of their cash awards into stock. The independent Lead Director, Mr. Sloan, received an additional $30,000. Bank of America also paid a $30,000 retainer to the Chairman of the Audit Committee and a $20,000 retainer to the Chairman of each of the other committees. The highest paid director, Charles Gifford received $1,631,396 in total compensation; $947,682 of which was use of company aircraft. Mr. Gifford was also paid a tax gross up of $281,307 related to his use of the company aircraft.

Director Tenure Only four of the active directors have served prior to 2001. The longest tenured director, Meredith Spangler, has served on the board since 1988. The second longest tenured member, Jackie Ward, has served on the board since 1994. Ms. Ward also serves as a director for Flowers Foods, Inc., Sanmina-SCI Corporation, SYSCO Corporation, and Wellpoint, Inc.

CEO Compensation Ken Lewis, Chairman, President, and CEO of Bank of America, was the highest paid executive. Mr. Lewis’s total compensation for 2008 was $9,959,076 down nearly 60% from his total compensation in 2007 of $24,844,040. Mr. Lewis’s use of corporate aircraft accounted for $220,267 of his 2008 total compensation. The board decided that none of the executives were to receive any type of bonus in 2008.

The second highest paid executive was Bruce L. Hammonds, President of Bank of America Card Services. Mr. Hammond’s total compensation package was $11,100,485. Of his total compensation, $6,800,000 was payment for a cancelled retention agreement following the merger of MBNA and Bank of America. Mr. Hammond’s use of corporate aircraft accounted for $18,401 of his total compensation.