The Director Compensation Project: Goodrich Corporation

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 (17 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 Goodrich Corporation’s (NYSE:GR) 2011 Proxy Statement.  According to the proxy statement, Goodrich paid its non-management directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Carolyn Corvi	102,000	90,000		1,062	193,062
Diane C. Creel	93,000	90,000		43,466	226,557
George A. Davidson, Jr.	94,500	90,000		45,554	230,054
Harris E. DeLoach, Jr.	117,250	90,000		58,838	266,088
James W. Griffith	104,750	90,000		23,663	218,413
William R. Holland	104,375	90,000		35,061	229,436
John P. Jumper	102,000	90,000		10,164	202,164
Lloyd W. Newton	94,500	90,000		8,242	192,742
Douglas E. Olesen	102,000	90,000		53,280	245,280
Alfred M. Rankin, Jr.	111,875	90,000		35,121	317,672
A. Thomas Young*	22,500	90,000		35,413	147,913

*Compensation amount reflects fees earned through retirement date of April 20, 2010.

Director Compensation.  During fiscal year 2010, Goodrich held 10 Board of Directors meetings and 21 Board Committee meetings.  Each director attended at least 75% of the aggregate number of meetings of the Board of Directors and meetings of the Board Committees on which he or she served.

Each of Goodrich’s non-management directors receives an annual cash retainer.  Prior to April 21, 2010 the retainer was $67,500; as of April 21, 2010, the retainer increased to $70,000.  Additionally, each non-management director received $1,500 for each board and committee meeting attended.  The chairs of the Governance, Financial Policy, Audit Review, and Compensation Committees each received additional cash retainers.  In 2005, Goodrich initiated an Outside Director Referral Plan, under which each non-management director could elect to defer all or a portion of their retainers either into a dividend-yielding phantom share account or into an interest-bearing cash account.

Each non-management director received an annual grant of phantom shares equal to $90,000.  Under this plan, all phantom shares fully vest on the date of grant and also accrue dividend equivalents.  Each non-management director’s other compensation amount includes dividend equivalents paid to each non-management director under the phantom share and deferred compensation plans.

Director Tenure.  Mr. Rankin, on Goodrich’s Board of Directors since 1988, held the longest tenure in 2010; Ms. Corvi held the shortest tenure, she joined Goodrich’s Board of Directors in 2009.  Several directors also sit on other boards.  Mr. Holland sits on the boards of EnPro Industries, Snyder’s Lance, Inc., Crowder Construction Company, and ERC, Inc.  General Jumper is also a director of SIAC, Inc. and Jacobs Engineering Group, Inc.

Executive Compensation. 

CEO - Marshall O. Larsen, Goodrich’s Chief Executive Officer since April 2003, received $9,828,255 in total compensation during the 2010 fiscal year, an increase of almost 13% over the prior year.  Mr. Larsen’s compensation consisted of $1,100,000 in base salary, $3,910,960 in stock awards, $1,762,050 in option awards, $1,987,036 in non-equity incentive plan compensation, $850,631 in valuation changes in deferred compensation earnings, and $217,578 in all other compensation.  Mr. Larsen’s other compensation amount included $125,614 for use of the company aircraft for personal travel.

CFO – Scott Kuechle, Executive Vice President and Chief Financial Officer of Goodrich, received $3,528,211 in total compensation during the 2010 fiscal year, an increase of 26.6% over the prior year.  Mr. Kuechle’s compensation consisted of $515,000 in base salary, $1,118,925 in stock awards, $456,060 in option awards, $611,586 in non-equity incentive plan compensation, $786,098 in valuation changes in deferred compensation earnings, and $40,542 in all other compensation.  Mr. Kuechle’s other compensation amount did not include any personal use of the company aircraft.

Beginning in 2010, Goodrich eliminated executive perquisites for the CEO and all direct reports to the CEO, with the exception of financial counseling and tax preparation and executive physicals.  To make up for this, Goodrich’s Compensation Committee increased the target bonus opportunity by 5-10% of annual salary for named executive officers.

Additional Information.  On September 21, 2011, Goodrich announced that it is being acquired by United Technologies Corporation in a $16.5 billion cash deal.  The transaction is subject to approvals from regulators and Goodrich’s shareholders.