Risk & Compliance

Corporate Boards Undergo Shakeup

Most companies hired new directors this year, while many are boosting the pay of committee chairs, a study finds.
Stephen TaubJune 9, 2004

Even though it’s getting tougher to hire new board members, most corporations are doing it, a new survey suggests.

Indeed, 54 percent of the 220 representatives of the large North American businesses participating in the study said their companies have brought in new directors this year. At the same time, 34 percent of the respondents reported that their companies found it “more difficult” to recruit directors in general.

Further, there’s considerable change going on in director pay packages, according to WorldatWork, a not-for-profit compensation and benefits professional association, and human-resources consultancy Towers Perrin. Thirty-four percent of the respondents, which were WorldatWork members, said their companies made changes to their directors’ pay for 2004.

To be sure, 66 percent of the participants in the survey said their companies did not make any changes to director pay for 2004, and 52 percent believe that their current director pay levels are competitive.

Nevertheless, the Sarbanes-Oxley Act’s increased stress on the roles of audit, compensation, and other key board committees appears to have moved companies to boost the pay of committee chairs, the survey suggests. Sixty-four percent of the respondents reported that their corporations added compensation to board members that serve as a board committee chair, according to the survey.

Of those organizations, 64 percent increased the pay by adding to the committee chairs’ annual retainers. Twenty percent of the companies boosted pay by adding to the committee chairs’ per-meeting fees, while 15 percent paid both a larger annual retainer and added per-meeting fees.

Most of the representatives said their companies don’t like to specify the form their director pay assumes. Seventy-three percent said their companies don’t have a director pay philosophy that targets a specific percentage mix of equity-to-cash compensation.

Of those that do have a philosophy, 53 percent tend to favor cash, while 26 percent prefer stock options.

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