The Director Compensation Project: AIG

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. 

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.

One can see some of the effects of these rules when looking at the director compensation table from American International Group’s (NYSE: AIG) 2011 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 ($)
Dennis D. Dammerman	23,750	0	0	0	23,750
Harvey Golub	471,250	49,970	0	0	521,220
Laurette T. Koellner	151,250	49,970	0	0	201,220
Donald H. Layton	120,000	49,970	0	0	169,970
Christopher S. Lynch	161,250	49,970	0	0	211,220
Arthur C. Martinez	150,000	49,970	0	0	199,970
George L. Miles, Jr.	151,250	49,970	0	0	201,220
Henry S. Miller	120,000	49,970	0	0	169,970
Robert S. Miller	369,519	49,970	0	0	419,489
Suzanne N. Johnson	141,250	49,970	0	0	191,220
Morris W. Offit	151,250	49,970	0	0	201,220
Ronald A. Rittenmeyer	120,000	49,970	0	0	169,970
Douglas M. Steenland	341,250	49,970	0	0	391,220

Director Compensation.  During the 2010 fiscal year, AIG held 25 Board meetings and 51 Board Committee meetings.  Each director attended at least 75% of both the Board meetings and his or her committee meetings.  All directors attended the 2010 shareholders meeting.  From January 2010 until April 2010, each director earned $75,000.  Effective April 1, 2010, this annual retainer increased to $150,000, and each director received $50,000 worth of deferred stock units.  In 2010, each committee chair received $15,000.  The chairman of the Audit Committee received an additional $25,000.  Every other committee member received $5,000.  The Chairman of the Board earned an additional $500,000.

Director Tenure.  The directors with the longest tenures are George L. Miles, Jr. and Morris W. Offit, who have served as directors since 2005.  The directors with the shortest tenures are Donald H. Layton, Henry S. Miller, and Ronald A. Rittenmeyer, who have served as directors since 2010.  Mr. Miller and Mr. Offit are the only directors who have not served on the boards of other companies.  Several directors have served on the boards of financially related companies.  For instance, Robert H. Benmosche serves on the board of Credit Suisse Group AG, Christopher S. Lynch serves on the board of the Federal Home Loan Mortgage Corporation, and John H. Fitzpatrick served on the board of Kemper Corporation from 1990-1996.

CEO Compensation.  In January 2011, Former Executive Vice President Mark A. Wilson resigned.  During the 2010 fiscal year, Mr. Wilson earned $13,305,376.  He was provided with a personal car and driver, for which AIG paid $15,659.  Additionally, AIG gave Mr. Wilson benefits of $8,423 for his personal use of club memberships and recreational opportunities and $261,344 for assignee benefits, which includes a housing reimbursement of $205,269, educational expenses for his children of $36,109, and travel for home leave of $19,966.  Kris P. Moor, AIG’s new Executive Vice President, earned $9,784,620 during the fiscal year.  AIG paid $6,300 for Mr. Moor’s car-related expenses and $15,600 for his financial, tax, and legal planning.  AIG’s Chief Executive Officer is Robert H. Benmosche, whose 2010 salary of $8,424,269 was not the highest among the executive officers.  AIG compensated Mr. Benmosche $24,390 for his personal car and driver.