BOD cost of governance study 06182012

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Board of Directors Total Cost of Governance in 30 Largest

Companies in the United States

Connell & Partners, a division of Gallagher Benefits Services, itself a division of Arthur J. Gallagher

(NYSE:AJG), one of the leading independent executive compensation consulting firms in the

country, completed a total cost of governance study of the 30 largest companies, by market

capitalization, in the United States. Total cost of governance is the total amount of Board fees paid

both in cash and stock, for Board and Committee service in a year to all independent Board

members (non-executives of the company.)

Key findings from the study include:

The median number of Board members in those companies is 13 (with a low of 9 at Apple, Microsoft, and Amazon and a high of 17 at Merck) and a median of 11 independent Board members (with a low of 7 at Apple, Microsoft , and Google and 16 at Merck).

Nine of the companies have separated the positions of CEO and Chairman: Apple, Disney, Google, Intel, McDonald’s, Microsoft, Oracle, Schlumberger, and Wal-Mart. Clearly the technology companies are leading the way in this arena, a current hot-button of corporate governance advocates.

The median total cost of governance is $3.226M with a low of $46,400 at Berkshire Hathaway, and a high of $6.167M at Cisco Systems. The median cost per independent Director is $295,797.

o The median company spends 0.002% of its market capitalization on its board of directors.

o Cost of governance is .056% of revenue at the median. o The median company spends 0.019% of the EBITDA (Earnings before

depreciation, taxes, depreciation and amortization).

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Companies included in the study, along with their ticker symbols, are as follows:

Abbott Laboratories ABT

Amazon.com, Inc. AMZN

Apple Inc. AAPL

AT&T Inc. T

Berkshire Hathaway Inc. BRK.B

Chevron Corporation CVX

Cisco Systems, Inc. CSCO

Comcast CMCSA

Disney DIS

Exxon Mobil Corporation XOM

General Electric Company GE

Google Inc. GOOG

Intel Corporation INTC

International Business Machines Corp. IBM

Johnson & Johnson JNJ

JPMorgan Chase & Co. JPM

McDonald's Corporation MCD

Merck & Co., Inc. MRK

Microsoft Corporation MSFT

Oracle Corporation ORCL

PepsiCo, Inc. PEP

Pfizer Inc. PFE

Philip Morris International Inc. PM

QUALCOMM Incorporated QCOM

Schlumberger Ltd. SLB

The Coca-Cola Company KO

The Procter & Gamble Company PG

Verizon Communications Inc. VZ

Wal-Mart Stores, Inc. WMT

Wells Fargo & Company WFC

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Connell & Partners is an independently run division of a $1.5B public company (Arthur J. Gallagher

(NYSE:AJG)) specializing in executive compensation consulting that is dedicated to providing

independent, insightful, and innovative advice in all areas of executive compensation and Board of

Directors remuneration. It’s founder, Jack Connell, has provided his expertise to more than 500

leading public companies over the course of his consulting career. He can be reached at 781-647-

2739 or via email at [email protected].

mailto:[email protected]