This excerpt taken from the JBLU DEF 14A filed Apr 21, 2009.
Narrative to Director Compensation Table
In March 2008, the Compensation Committee recommended, and the Board of Directors approved, modifications to our director compensation program to provide our Board members with overall compensation that we believe is more in line with compensation that is received by other directors of companies in the domestic airline industry. These compensation changes became effective in the second quarter of 2008. The Companys compensation consultant, Watson Wyatt, provided advice on the proposed Board member compensation package ultimately approved by the Compensation Committee.
Our Board compensation package is composed of an annual retainer fee of $35,000 (paid quarterly in advance), a per meeting fee of $1,000 for each Board and committee meeting attended (in person or telephonically), and an annual equity grant of $35,000 of deferred common stock units, determined at fair market value, payable to directors serving on the Board of Directors on the grant date. The Audit Committee chair receives an additional $20,000 annual retainer and the chairs of our other standing Board committees each receives an additional $5,000 annual retainer. The proposed cash to equity allocation of this package is 60% to 40%, with the objective of paying total annual compensation of approximately $80,000 per Board member to each director who is not a committee chair; this targeted amount assumes attendance at all meetings of the Board and the standing committees on which the director serves. We believe this revised compensation package will better enable us to recruit and retain qualified directors. Our non-employee directors will continue to receive flight benefits and reimbursement of expenses, as set forth below.
Prior to the restructuring of our director compensation program, each of our non-employee Board members received an initial option to purchase 54,000 shares of our common stock pursuant to the automatic option grant program under our Amended and Restated 2002 Stock Incentive Plan, either (i) on the effective date of our 2002 initial public offering or (ii) upon their appointment to the Board of Directors. The options issued to directors serving on the effective date of our 2002 initial public offering had an exercise price per share of $8.00, which is equal to the price per share at which our common stock was sold to the public in our initial public offering. Options issued after the initial public offering had an exercise price equal to the closing price on the grant date. All director options have a term of ten years, subject to earlier termination following the directors cessation of Board service. The initial grant of option shares vested in a series of four successive annual installments upon the directors completion of each year of Board service over the four-year period measured from the grant date. In addition, until the 2008 Annual Meeting of stockholders, each non-employee Board member continuing to serve as a non-employee Board member following the annual meeting of stockholders was automatically granted an option to purchase 13,500 shares of our common stock, provided such individual served on our Board for at least six months. The shares subject to each annual 13,500 share automatic option grant had an exercise price equal to the average market price per share
of our common stock on the grant date and vest upon the directors completion of one year of Board service measured from the grant date. Any vested but unexercised options are exercisable for a period of twelve months following the cessation of the directors Board service. The shares subject to each automatic option grant will immediately vest in full upon certain changes in control or ownership, or upon the directors death or disability while a Board member. Prior to the revision of our director compensation program, directors who had been with the Company at the time of its 2002 initial public offering received no cash compensation. Non-employee directors who joined us following our 2002 initial public offering received a cash payment of $10,000 per quarter, in addition to the equity grants discussed above. The initial option grants were terminated when the Board adopted the revised compensation package in May 2008. Starting with 2008, the directors serving on the grant date each received a grant of 7,000 deferred stock units.
In 2008, two of our directors, Mr. Peterson and Ms. Rhoades, donated the cash portion of their Board compensation to the JetBlue Crewmember Crisis Fund, a non-profit organization that assists JetBlue employees facing emergency hardship situations.
Flight Benefits. As is customary in the airline industry, all members of the Board of Directors and their immediate family may travel without charge on our flights.
Reimbursement of Expenses. We reimburse our directors, including those who are full-time employees who serve as directors, for expenses incurred in attending meetings.