Not yet a Member?
HR Magazine is highlighting the next generation of HR leaders.
Is your employee handbook ready for the New Year? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Get the HR education you need without travel expenses or time out of the office.
Join us in Chicago for the latest trends and technology in talent management, and what to expect in the future.
Compensation for those serving on corporate boards of directors continues to move away from board meeting fees and toward larger retainers. In particular, higher compensation for board committee chairs and other board leadership positions has become commonplace, according to the National Association of Corporate Directors (NACD) Director Compensation Survey: 2007-2008.
Aside from the board chairs, outside directors sitting on audit committees or on compensation committees lead with the highest pay for their board services in 2007. Among the top 200 U.S. industrial and service companies by revenue:
• Median pay for audit committee members was $10,000 above their board member compensation. • Median pay for compensation committee members was an extra $5,500.
Chairs of both committees were paid significantly more:
• Median audit chair pay was $25,000 above board member compensation. • Median compensation chair pay was an extra $15,500.
"Directors with strong risk management backgrounds are hard to find, and audit committee chairs are spending an enormous amount of time on committee work, even more so now with the current credit and liquidity crisis and volatility in the economy,” according to Ken Daly, CEO and president of NACD. He says that directors spend an average of 207.4 hours on board work, with 98 of those hours spent on committee work.
"Differential pay for committee chairs is clearly understandable, yet it is also important to remember that higher pay for committee work in no way reduces the accountability of all board members for important board decisions," Daly adds. "Committees make recommendations. The board makes decisions.”
Smaller Companies, Too
The report also compared board compensation data from the 200 largest U.S. companies with that of U.S. companies with revenue ranging from $50 million to more than $10 billion, across all industries. Among the findings:
• Total compensation costs for board fees increased, ranging from a median of $448,808 at small companies to $2.02 million at the top 200. As a percentage of revenue at those companies, total compensation ranged from 0.19 percent at smaller companies to 0.01 percent at the top 200. • Benefits and perks are more prevalent at large companies and more likely to be disclosed. Specifically:-- Gift matching/charitable gifts are most prevalent across all companies, ranging from 0.9 percent at smaller companies up to 37 percent at the top 200 companies.-- Life/health insurance is the next most prevalent perk, but in single digits in terms of prevalence until the top 200 companies (25 percent of which offer the benefit).
Directors' Stock Compensation
Another trend: Eighty-nine percent of the top 200 companies reported using full-value shares of company stock in director compensation packages. Only 35 percent of companies use stock options.
"Equity is an important tool for aligning boards with shareholders,” Daly says. "With the exception of the smaller companies in the survey, the majority are following the NACD's recommendation of providing at least 50 percent of compensation in the form of equity.”
Guidelines for stock ownership by directors are now common,with 84 percent of the top 200 companies having guidelines in place, deferring share awards until retirement, or both. In 2007, ownership guidelines increased 23 percent at "smaller” companies compared with a year earlier, but their prevalence grew proportionately as the size of company revenues increased.
Stephen Milleris manager of SHRM Online's Compensation & Benefits Focus Area.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
HR Education in a City Near You
SHRM’s HR Vendor Directory contains over 3,200 companies