The Director Compensation Project: Wal-Mart Stores, Inc.

The Director Compensation Project: Wal-Mart Stores, Inc.

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010’s Fortune 500 and using information found in their most recent 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 "any compensation."  Rules 303A.06 and 5605 also require that, in addition to the general independence standards, audit committee members must comport with the requirements of  Rule 10A-3 (C.F.R. §240.10A-3).  See also IM-5605-4. Audit Committee Composition.

The director compensation table from Wal-Mart Stores, Inc.’s (NYSE:WMT) 2011 proxy statement is listed below. According to the proxy statement, the company paid the directors the following amounts:

Director Compensation Table.

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Aida M. Alvarez	64,000	160,000	0	47,050	271,050
James W. Breyer	79,000	160,000	0	1,179	240,179
M. Michele Burns	60,000	160,000	0	0	228,483
James I. Cash, Jr.	64,000	160,000	0	38,647	262,647
Roger C. Corbett	76,000	160,000	0	61,972	297,972
Douglas N. Daft	64,000	160,000	0	24,931	254,498
Gregory B. Penner	64,000	160,000	0	0	224,000
Allen I. Questrom*	25,715	0	0	0	25,715
Steven S Reinemund	34,451	160,000	0	0	194,451
Arne M. Sorenson	64,000	160,000	0	0	224,000
Jim C. Walton	64,000	160,000	0	2,037	226,037
Christopher J. Williams	104,000	160,000	0	54,864	318,864
Linda S. Wolf	89,000	160,000	0	25,127	274,127

*Compensation amount reflects fees earned through term expiration on June 4, 2010.

Director Compensation.  Wal-Mart’s board only held seven meetings during the 2011 fiscal year, four were regular meetings and three were special meetings.  Each director attended at least 75% of the combination of the seven board meetings and their designated committee meetings.  The base compensation for directors consisted of a share award and an annual retainer.  In 2010, each director received an annual equity award of shares with a market value of $160,000.  Each director also received a $60,000 annual retainer. The chairs of the Audit Committee and the Compensation, Nominating and Governance Committee each received a $25,000 retainer and the Strategic Planning and Finance Committee chair received a $15,000 retainer.  Christopher J. Williams received an additional retainer of $15,000 for his service on the Executive Committee because he serves on more than one board committee.  In addition, each director who attends a board meeting, in person, that requires intercontinental travel is paid a $4,000 meeting attendance fee.

Director Tenure.  The longest tenure of Wal-Mart’s directors is S. Rodson Walton, a director since 1978.  The most recent addition to the board is Steven S. Reinemund, who joined in 2010.  Several directors also serve on other boards.  Mr. Reinemund serves as a director for Exxon Mobil Corporation, American Express Company, and Marriott International, Inc.  Ms. Wolf also serves on the boards of the Field Museum, Children’s Memorial Hospital, and The Chicago Council on Global Affairs.

Executive Compensation.  President and CEO, Michael T. Duke, received a salary of $1,232,670 in fiscal year 2011 and a total compensation worth $18,712,721.  The second highest paid executive was William S. Simon, who was promoted to Executive Vice President on June 23, 2010. Mr. Simon received a salary of $802,335 and a total compensation worth $14,054,824.  Simon earned most of his compensation via Stock Awards because the awards include two annual awards: annual equity awards for both fiscal year 2011 and fiscal year 2012.  The cost of personal use of the Wal-Mart aircraft  for Mr. Duke and Mr. Simon was $93,258 and $27,010, respectively.  The executive that used the Wal-Mart aircraft the most in 2010, was Vice Chairman, Eduardo Castro Wight, with $240,535 worth of charges.

Comments

[czander]

Walmart engages in the practice of “moving the goal posts” on executive pay and in 2011 they did just that for their CEO Michael Duke. In April 2011 Walmart’s compensation committee replaced a metric that was not showing their CEO’s competence and they found a new metric that made certain Duke would get a handsome raise bringing his total compensation to $18.7 million of which $16 million was performance based. In January 2010 over 12,000 employees were terminated