The Director Compensation Project: Amazon.com, 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.

One can see some of the effects of these rules when looking at the director compensation table from Amazon.com, Inc. (NYSE:AMZN) 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 ($)
Jeffrey P. Bezos	81,840	0	0	1,600,000	1,681,840
Tom A. Alberg	0	0	0	0	0
John Seely Brown	0	0	0	0	0
L. John Doerr	0	0	0	0	0
William B. Gordon	0	0	0	0	0
Alain Monie	0	0	0	0	0
Jonathan J. Rubinstein*	0	883,350	0	0	883,350
Thoman O. Ryder	0	0	0	0	0
Patricia Q. Stonesifer	0	0	0	0	0

*Mr. Rubinstein was the only director to be granted stock in 2010 and held 5,000 unvested restricted stock units as of December 31, 2010. At this date, Mr. Brown held 4,666 unvested restricted stock units from a previous year; Messrs. Gordon and. Monie each held 2,333 unvested restricted stock units.

Director Compensation.  During fiscal year 2010, Amazon, held 7 Board of Directors meetings and 23 Board Committee meetings.  Each director attended at least 75% of the aggregate number of meetings of the Board of Directors and Board Committees on which he or she served.  All directors, except Mr. Gordon, attended the 2010 Annual Meeting of Shareholders.  In 1997, Amazon initiated a stock incentive plan as the means to compensate board members; Amazon also reimburses reasonable expenses for attending Board meetings.  The Nominating and Corporate Governance Committee recommends restricted stock unit awards to Board members, which vest in three equal annual installments.  The Board must approve these recommendations.  The first vesting occurs one year after election to the Board.  Directors do not receive additional stock for service on a committee.

Director Tenure.  Mr. Bezos has been Chairman of the Board since the company’s inception in 1994 and holds the longest tenure.  Mr. Alberg has the second longest tenure and has been a director since 1996.  The shortest tenured Board member is Mr. Rubinstein, who became a director in December of 2010.  Several directors also sit on other boards.  Mr. Ryder sits on the boards of Starwood Hotels & Resorts Worldwide, Inc., and Quad/Graphics, Inc.  He also served as Chairman of the Board for Virgin Mobile USA, Inc., and was a senior executive at Reader’s Digest.  Ms. Stonesifer served as Chair of the Board of Regents of the Smithsonian Institution and was Chief Executive Officer of the Bill and Melinda Gates Foundation.

CEO Compensation.  Mr. Bezos, who has served as Amazon’s Chief Executive Officer since May of 1996, earned a base salary of $81,840.  He was compensated $1,600,000 for security costs in 2010.  Mr. Bezos owns approximately 20% of Amazon’s shares outstanding and has never received compensation through stock. Amazon’s main form of compensation for named executive officers is stock based grants.  The Chief Financial Officer, Thomas Szkutak, made $160,000 and received 46,000 restricted stock units valued at $6,465,300.  The compensation for other named executive officers are only slightly different; Senior Vice President of International Retail, Diego Piacentini, received the same amount of stock and earns $175,000 in addition to $55,905 in expatriate benefits, which includes a housing and cost of living allowance and tax reimbursements. Senior Vice President of North American Retail, Jeffrey Wilke, received a stock compensation package of 50,000 restricted stock units valued at $7,027,500.