Yesterday, Google announced that former Ford Motor Co. CEO Alan Mulally was joining its board and was appointed to the company’s audit committee. That news was widely covered, with much of the coverage focusing on Google’s quest for a driver-less car.
Not included in much of the coverage, but part of the 8-K that Google filed yesterday was the additional disclosure that director K. Ram Shriram would be stepping down from the audit committee to make room for Mulally.
But the thing that really caught our eye was the letter agreement attached to the 8-K spelling out the terms upon which Mulally joined Google’s board. It’s been over two years since a new director joined Google’s board. The last one, which we footnoted at the time, was Diane Greene in January 2012.
When we compared Mulally’s agreement with Greene’s, two things jumped out at us. First, the company disclosed in the letter a new requirement that directors need to hold $750K of fully vested shares. The agreement goes on to note that new directors — like Mulally — have five years to hit that benchmark. Since directors get an initial grant of Google stock units valued at $1m, 25% of which vest on the 1-year anniversary, getting to $750K doesn’t seem like a tall order.
The second new thing in the letter is that directors are reimbursed for first-class air travel in connection to the director’s service to Google. While the company had spelled out that it covered travel expenses before, the first-class requirement was never spelled out.
Of course, during his long tenure at Ford, Mulally was used to flying one of the company’s private jets for both business and personal use. As this WSJ piece from 2007 points out, it was even a perk extended to his family. And the most recent proxy, which we flagged here, noted that the company spent over $230K to provide Mulally with personal use of the corporate jet last year.
Which means that being relegated to just first-class, even if it’s just for Google-related activities, is actually a downgrade.