Director’s Compensation Project: Proctor and Gamble

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2011's Fortune 500 and using information found in their 2011 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.  

NYSE Rule 303A.01, requires that each listed company’s board of directors be comprised of a majority of independent directors. A director is considered independent under NYSE Rule303A.02(b)(ii) if the director received less than $120,000 in direct compensation, other than director’s fees, in any one year period over the last three years. The NYSE “direct compensation” standard is less restrictive than the corresponding NASDAQ Rule, 5605(a)(2)(B), which includes "any compensation."  NYSE Rule 303A.06 requires a listed company’s audit committee members to comport with the requirements of Rule 10A-3 (C.F.R. §240.10A-3). 

Independent directors are compensated for their service on the board.  The amount of compensation can be seen from examining the director compensation table from the Proctor & Gamble (NYSE:PG) 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 ($)
Angela F. Braly	106,000	160,000	0	15,262	281,262
Kenneth I. Chenault	106,000	160,000	0	109	266,109
Scott D. Cook	117,750	160,000	0	117	277,867
Susan Desmond-Hellmann	58,333	0	0	11,898	70,231
Rajat K. Gupta*	72,667	0	0	0	72,667
W. James McNerney, Jr.	136,500	160,000	0	123	296,623
Johnathan A. Rodgers	102,000	160,000	0	12,566	274,566
Margaret C. Whitman	41,667	0	0	107	41,774
Mary Agnes Wilderotter	104,000	160,000	0	16,679	280,679
Patricia A. Woertz	124,750	160,000	0	107	284,857
Ernesto Zedillo	117,750	160,000	0	11,825	289,575

*Resigned effective March 1, 2011

Director Compensation.  During fiscal year 2011, Proctor & Gamble held 8 Board of Directors meetings and 21 Board Committee meetings.  Each director attended at least 86% of the aggregate number of meetings of the Board of Directors and meetings of the Board Committees on which he or she served.  Each Director was paid an annual retainer of $100,000 and was given an annual grant of $160,000 in restricted stock units.  Directors who did not serve on the board for all of fiscal year 2011 were paid a prorated portion of their annual retainer and forfeited their annual stock grant.

Director Tenure.  Mr. Cook, on the Board of Directors since 2000, holds the longest tenure on the board.  Ms. Desmond-Hellmann and Ms. Whitman are the newest members of the board, elected in December 2010 and February 2010, respectively.  Ms. Whitman is the former President and Chief Executive Officer of eBay Inc. and lost her bid in 2010 for the Governor of California.  Several directors also sit on other boards.  Mr. Chenault is Chairman and Chief Executive Officer of the American Express Company and sits on the board of IBM.  Mr. Cook sits on the boards of Intuit Inc. and eBay Inc.  Mr. McNerney is Chairman of the Board, President, and Chief Executive Officer of the Boeing Company and sits on the board of IBM.  Mrs. Wilderotter is Chairman of the Board, President, and Chief Executive Officer of Frontier Communications Corporation and sits on the board of Xerox.  Ms. Woertz is Chairman, Chief Executive Officer, and President of Archer Daniels Midland Company.  Mr. Zedillo served as President of Mexico from 1994 to 2000, and sits on the board of Alcoa Inc., Citigroup, Inc., and Grupo PRISA. 

CEO Compensation.  Mr. MacDonald, who currently serves as Proctor and Gambles’ Chairman of the Board, President, and Chief Executive Officer, earned $16,188,037 in total compensation in fiscal year 2011.  Mr. MacDonald’s compensation included $1,600,000 in base salary, $2,632,000 in bonuses, $11,771,613 in stock based grants, $51,747 in retirement plan contributions, and $97,670 in personal use of corporate aircraft.  Werner Geissler, Proctor and Gambles’ Vice Chairman of Global Operations and the second highest paid officer, earned $6,304,942 in total compensation.  Jon R. Moeller, Proctor and Gambles’ Chief Financial Officer, earned $4,962,459, the lowest amount of any of the six named executive officers.  All of Proctor and Gambles’ named executive officers received financial counseling including tax preparation, use of a company car, secure workplace parking, and home security and monitoring.