April 29, 2010
Survey Results: Director Compensation Decreases, Cash Compensation on the Rise
– Broc Romanek, CompensationStandards.com
Below is an excerpt from this recent NACD press release:
Corporate board pay levels are flat or down compared to last year, according to the NACD’s annual Director Compensation Survey: 2009-2010. Created in partnership with consulting firm Pearl Meyer & Partners, the report examines director pay trends among public boards in four size categories, along with a fifth category of the Top 200 companies – ranging in revenues from $50 million to over $10 billion – across multiple industry verticals. Data is used as an important benchmarking tool for boards to review or establish effective and competitive compensation plans.
The report also shows a link between the composition of director compensation and the current economic environment. Cash compensation, consisting of annual retainers and fees for board and committee service, represented a greater proportion of total compensation. The percentage of director pay in the form of equity declined significantly, largely as a result of lower share prices. While stock compensation was generally below the 50% benchmark, there was also a significant shift away from the use of stock options in favor of full-value share grants.
Key Highlights:
Median total direct compensation:
– Companies with revenues of $50 million to $500 million — decreased 3% to $75,490
– Companies with revenues of $500 million to $1 billion — decreased 6% to $108,836
– Companies with revenues of $1 billion to $2.5 billion — decreased 2% to $131,054
– Companies with revenues of $2.5 billion to $10 billion — decreased 1% to $164,455
– Companies with revenues over $10 billion plus — increased 1% to $216,186
Compensation by industry:
– Highest compensated included: Pharmaceutical & Medical Products, Diversified Financial & Brokerage, Petroleum/Crude Oil Production & Pipelines and Computer Products & Services
– Lowest compensated included: Transportation & Distribution, Motor Vehicles & Parts and Banks/Savings & Loans
From an organizational perspective, the NACD report found that the work of corporate boards is being conducted increasingly at the committee level as directors seek to most effectively address the volume of issues they face. Virtually all companies in the survey maintained audit and compensation committees with the vast majority also having a governance/nominating committee. A sizeable majority of companies differentiate pay among committees in some way, reflecting the difference in relative workloads.
Continuing a practice begun in the wake of Sarbanes-Oxley, audit committee member compensation is highest, reflecting a significant rise in responsibilities and time commitment required as a result of regulation. Compensation committees follow, due largely to increased workloads and a more intense scrutiny of their decisions by all stakeholders.