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Board Pay Gets Fatter as Job Gets Hairier
03/07/05
By: Gary Strauss, USA Today
Corporate directorships are becoming more lucrative — again.
Morgan Stanley is raising 2005 pay 114% to $75,000, according to a USA TODAY analysis of early 2005 proxy filings. Alcoa is boosting retainers nearly 17% to $175,000. Hershey's stock grant to each director is now worth $80,000, up 33%, pushing retainers to $135,000. Many companies are also increasing meeting fees — utility Pepco is boosting per-meeting payments 60% to $2,000. Others, such as U.S. Bancorp, are doubling pay to committee chairs.
| More money for directors
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| Changes in compensation for 2005:
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| Current
| Former
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| Alcoa
| Annual retainer fee
| $175,000
| $150,000
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| Pepco
| Meeting fees
| $2,000
| $1,250
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| Morgan Stanley
| Annual stock grants in shares
| 4,000
| 2,000
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| U.S. Bancorp
| Audit committee chair annual fee
| $20,000
| $10,000
| Source: SEC filings
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If early patterns hold, the average director's pay at Fortune 200 companies could surge to $200,000, up 14% from 2004, says Jan Koors of consultant Pearl Meyer & Partners. The cash component of directors' pay at S&P 500 companies — now topping $50,000 after 15% gains in both 2004 and 2003 — is also up.
"We'll definitely see increases this year" as companies try to make directorships more appealing with larger pay packages, says Julie Daum of Spencer Stuart, a leading board recruiter.
Board seats used to be part-time jobs that offered CEOs, academics and former politicians fat stipends for relatively little work. No longer. Compensation Resources consultant Paul Dorf notes that the easygoing era of directors hobnobbing in genteel, clubby anonymity is gone. New regulatory requirements mandating more corporate oversight and scrutiny by outside directors have made the jobs riskier, more complex and adversarial.
"There are more demands and more time involved," says ex-Medtronic CEO William George, a director at Goldman Sachs, Novartis and Target. "The audit committee hours have tripled, and there's a lot more prep time," he says.
Directors can no longer rely on a company's insurance to protect them from legal liability, either. Following meltdowns at WorldCom and Enron, former directors at both agreed to personally fork out millions to settle shareholder lawsuits. A judge threw out the WorldCom deal last month.
Increasingly, companies are limiting CEOs' outside directorships, while other CEOs have decided multiple board seats aren't worth their time — making it difficult for headhunters to tap prized CEOs for board vacancies. "We used to get a response in two or three calls," Daum says. "Now we can call 10 CEOs and not get a response."
Yet while the field of candidates may be dwindling, most directorships still hold appeal. "It is harder work — there's more scrutiny, a bigger time commitment and more risk," Koors says. "But directors are well compensated."
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