Director's Compensation Project: Coach, Inc.

This post is part of an ongoing series that examines the compensation paid to independent directors of public companies. We are using information found in the 2011 proxy statements of the selected companies.

In addition to state standards and Sarbanes-Oxley (“SOX”) requirements, the major U.S. stock exchanges each have their own standards for independence. While the NYSE and NASDAQ rules are substantially the same, there are some minor differences between the two 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 Rule 303A.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).  SOX Section 301 imposes similar requirements.

Independent directors are compensated for their service on the board.  The amount of compensation can be seen from examining the non-management director compensation table from Coach, Inc. (NYSE:COH) 2011 proxy statement. According to the proxy statement Coach paid its non-management directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Susan Kropf	60,000	75,000	75,000	0	210,000
Gary Loveman	60,000	75,000	75,000	0	210,000
Ivan Menezes	90,000	75,000	75,000	0	240,000
Irene Miller	110,000	75,000	75,000	0	260,000
Michael Murphy	90,000	75,000	75,000	0	240,000
Jide Zeitlin	60,000	75,000	75,000	0	210,000

Director Compensation. The Board of Directors met 6 times in 2011 and Board Committees met 16 times. Each director attended 75% or more of the Board meetings and Board Committee meetings. Non-employee directors received a cash retainer of $60,000 for their services. An additional cash retainer of $20,000 or $30,000 was paid to directors who served as committee chairs. Directors are granted an annual equity of approximately $150,000, 50% comprised of stock options and 50% comprised of Restricted Stock Units.

Director Tenure. Lew Frankfort, Chairman of the Board and Chief Executive Officer, holds the longest tenure on the Board. He first became a director in January 2000 when the company split from Sara Lee Corporation. Michael Murphy became a director in September 2000. The majority of the directors sit on the boards of other companies and organizations. Lew Frankfort sits on the board of Teach for America, Advanced Assessment Systems, and on the Board of Overseers at Colombia Business School. Susan Kropf serves on the Boards of MeadWestvaco Corp., Sherwin Williams Co., Kroger Co., and the Wallace Foundation. Jide Zeitlin serves on the Board of Trustees at Amherst College, Affiliated Managers Group, Inc., Milton Academy, the Harvard Business School Board of Dean’s Advisors, Teach for America, Doris Duke Charitable Foundation, Montefiore Medical Center, Playwrights Horizons, and Common Ground Community.

Executive Compensation. In 2011, Lewis Frankfort, Chairman and Chief Executive Officer, received a base salary increase from $1,214,000 to $1,500,000. He received an increase in his maximum incentive opportunity from 200% to 250%. Including stock awards, option awards, and other compensation, Frankfort received a total of $12,391,474.