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 2010 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 $120,000 in direct compensation, other than director's fees, in any one year period over the last three years pursuant to Rule 303A.02(b)(ii). This is a looser restriction than the equivalent NASDAQ Rule, 5605(a)(2), which includes all compensation. Rule 303A.06 requires that, in addition to the general independence standards, audit committee members must comport with the requirements of Exchange Act Rule 10A-3 (C.F.R. §240.10A-3), also know as SOX 301. One can see some of the effects of these rules when looking at the director compensation table from Wells Fargo & Company's (NYSE:WFC) 2010 proxy statement. According to the proxy statement, the company paid the directors the following amounts: Name Total ($) John D. Baker 373,739 John S. Chen 289,789 Lloyd H. Dean 333,789 Susan E. Engel 307,789 Enrique Hernandez, Jr. 326,789 Donald M. James 341,739 Robert L. Joss* 267,460 Richard D. McCormick 297,789 Mackey J. McDonald 339,739 Cynthia H. Milligan 320,244 Nicholas G. Moore 359,789 Philip J. Quigley 343,789 Donald B. Rice** 300,789 Judith M. Runstad 293,789 Stephen W. Sanger 317,789 Robert K. Steel 335,739 Susan G. Swenson 305,789 Michael W. Wright*** 47,000 * Mr. Joss resigned as a Director effective July 23, 2009. Compensation amount reflects fees earned through retirement date. ** Mr. Rice will retire as a Director effective at the 2010 annual meeting. Compensation amount reflects fees earned through retirement date. *** Mr. Wright retired as a Director effective at the 2009 annual meeting. Compensation amount reflects fees earned through retirement date. Director Compensation. During fiscal year 2010, Wells Fargo held 15 Board of Directors meetings with a 98% attendance rate. The aggregate attendance rate for all meetings of the Board of Directors and meetings of the Board Committees was 75%. All non-employee Directors and executives are required to own shares of Wells Fargo common stock. Specifically, within 5 years of election, each director must own common stock worth five times the cash value of his or her annual cash retainer. Each director receives an annual cash retainer of $75,000 and additional retainers for serving as Lead Director ($30,000) or Committee Chair (ranging from $15,000 – $30,000). Further, each director receives $2,000 for attending meetings of the Board of Directors and meetings of Board Committees. Finally, employee directors do not receive additional compensation for their service on the Board of Directors. Director Tenure. In 2010, Mr. McCormick, a Director since 1983, has the longest tenure on the Board of Directors. Next, Mr. Rice, a Director since 2005, will retire at the 2010 annual meeting. Several members of Wells Fargo's Board of Directors sit on other boards. Mr. Hernandez, a Director since 2003, sits on the boards for Chevron Corporation and McDonald's Corporation and is the Chairman of the Board for Nordstrom, Inc. Messrs. Sanger and Stumpf sit on the Board of Directors for Target Corporation. Mr. Sanger also sits on the Board for Pfizer, Inc. CEO Compensation. On October 28, 2008, the U.S. Treasury Department invested $25 billion in Wells Fargo preferred stock under the TARP CPP, subjecting the company to extensive regulations regarding executive compensation. The entire TARP investment was repaid on December 23, 2009, giving the company more flexibility to determine compensation. John G. Stumpf has been the CEO of Wells Fargo since 2007 and has been the Chairman of the Board of Directors since 2009. Mr. Stumpf earned a total of $21,340,547 during 2009, including $5.6 million in base salary. Under the TARP regulations, all salary increases from 2008 were paid entirely in Wells Fargo common stock. David M. Carroll was the second highest paid executive, receiving $14,302,770 in total compensation during fiscal year 2009. This figure includes $700,000 in base salary. Wells Fargo entered into a one-year employment agreement with Mr. Carroll, employing him to serve as the Senior Executive Vice President of the Wealth Management, Brokerage and Retirement Services Group. Mr. Carroll's agreement superseded his previous agreement with Wachovia (acquired by Wells Fargo on December 31, 2008), which would have entitled Mr. Carroll to certain severance payments if his employment was terminated after the acquisition. This employment agreement expired on December 31, 2009.
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