Director's Compensation Project: United Technologies Corp.

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 United Technologies, Corp. (NYSE:UTX) 2011 proxy statement. According to the proxy statement, United Technologies paid its non-management directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
John V. Faraci	0	280,000	0	149	280,149
Jean-Pierre Garnier	0	255,000	0	0	255,000
Jamie S. Gorelick	96,000	144,00	0	0	240,000
Carlos M. Gutierrez*	96,000	144,000	0	2,691	242,691
Edward A. Kangas	0	270,000	0	2,302	272,302
Ellen J. Kullman**
Charles R. Lee	102,000	153,000	0	0	255,000
Richard D. McCormick	0	280,000	0	0	280,000
Harold McGraw III	0	240,000	0	0	240,000
Richard B. Myers	108,000	162,000	0	665	270,665
H. Patrick Swygert	0	270,000	0	16,533	286,533
André Villeneuve	0	270,000	0	0	270,000
Christine Todd Whitman	102,000	153,000	0	0	255,000

*Gutierrez resigned from the board in December of 2010.

**Kullman became a director in January of 2011 and was not included on the Director Compensation able provided in the proxy statement.

Director Compensation.  The Board of Directors met 7 times in 2010 and Board Committees met 27 times. Each director attended at least 75% of the total number of Board meetings and Board Committee meetings on which he or she served. Directors did not receive compensation for attending regularly scheduled meetings, but did receive $5,000 for any special meetings they attended. Each non-employee director received a cash retainer of $96,000. Chairs of certain committees and the Lead Director received higher cash retainers. Directors could elect to receive the cash retainer in deferred stock units. Non-employee directors received a $100,000 restricted stock award upon their election which will be distributed upon retirement, termination or death.

Director Tenure. A director since 1994, Charles R. Lee holds the longest tenure on the Board of Directors. He also serves as a director of United States Steel Corporation, Marathon Oil Corporation, and DIRECTV. Christine Todd Whitman is a director of Texas Instruments Inc., S.C. Johnson & Son, Inc., and the Council on Foreign Relations. She is on the board of trustees of the Eisenhower Fellowship Foundation, the Steering Committee of The Cancer Institute of New Jersey, and the Governing Board of the Park City Institute. Carlos M. Gutierrez, a director since 2009, resigned from the Board December 8, 2010.

Executive Compensation. Louis R. Chênevert, Chairman of the Board and Chief Executive Officer, received a base salary increase from $1.54 million to $1.625 million. Due to free cash flow performance and earnings of the company, Chênevert was awarded a bonus of $4 million. Including the stock awards, option awards, and other compensation, Chênevert’s total compensation in 2010 was $22,086,161. Chênevert is given access to the company aircraft for personal use. As a Named Executive Officers, Chênevert receives an allowance equal to 5% of his annual base salary that may be paid in cash or may be used for costs of a vehicle leased by the company.