Directors Face Compensation Reality

Thanks to the multitude of new compensation disclosure requirements put into effect by the SEC last year, executive compensation rose to the top of the boardroom agenda. The regulatory intent was to give investors “a clearer and more complete picture of compensation of management.” The new rules, spelled out over 400 pages, require compensation data to be charted and described [...]

Thanks to the multitude of new compensation disclosure requirements put into effect by the SEC last year, executive compensation rose to the top of the boardroom agenda. The regulatory intent was to give investors “a clearer and more complete picture of compensation of management.” The new rules, spelled out over 400 pages, require compensation data to be charted and described in a narrative fashion so that, in theory, each part of the pay package can be fully identified and quantified.

Against this backdrop, Steven Hall & Partners studied the proxy statements of the 100 largest publicly traded corporations for the fiscal year ending Dec. 31, 2006. What that research showed was that the median annual cash retainer being paid to directors increased year-over-year by 16 percent. That number parallels the increase in CEO pay, although board pay is not growing as rapidly,according to Pearl Meyer, now senior managing director of Steven Hall& Partners, the executive compensation consultancy she co-founded after leaving her eponymous firm. In its most recent review of CEO pay, Forbes reported that the chief executives of America’s 500 biggest companies got a collective 38 percent pay raise last year, altogether netting $7.5 billion. By Forbes’s estimate, that’s an average $15.2 million apiece. Exercised stock options accounted for the main component of pay, 48 percent. The average stock gain was $7.3 million.

StevenHall’s study, to be published this fall, shows total remuneration, including cash, retainer, board meeting fees, committee compensation and equity, for non-chair board members up 4.2 percent to $213,8000, from an average of $205,150 a year earlier. Audit committee chairmen saw their total pay creep up almost 3 percent to $230,322 while total remuneration for compensation committee chairmen rose 6.8 percent from $213,966 to $228,500.

“In general,” says Meyer, “the average paycheck depending on your assignments is going to run from $213,000 to $230,000 all in.”

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