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Web Views: Gasoline Graphics
By Anita Malik
Is Water the New Oil?
By Jennifer Hopfinger
Symbolic Indictments?
By Jonathan Higuera
Don't Forget Director Pay
By Michelle Leder
Complete Gasoline Coverage
By Amy Eagleburger
Don't Forget Director Pay
By Michelle Leder
June 19, 2008
When it comes to reviewing proxy statements for details on executive compensation, most business journalists tend to hone in with a laser-like focus on the CEO, often examining various aspects of the executive’s total compensation package. Sometimes, though far too frequently in my book, the company’s other top executives face similar analysis.
But that same scrutiny is very rare when it comes to looking at how much the company’s directors make for serving on the board. And, given that directors are a key line of defense for questionable accounting, excessive compensation, and all sorts of other key decisions, such as selling the company or acquiring another company, that lack of attention is simply not acceptable.
Last year, the Securities and Exchange Commission began requiring additional disclosure on CEO pay as well as the pay for the other “named executive officers”. At the same time, they began requiring additional disclosure on director’s pay packages. And, judging by the recent crop of proxies, director pay is surging.
A recent study by Equilar found that median director compensation rose by 7.2 percent between 2006 and 2007 to $173,640 and the cash retainer portion of director compensation increased by 20 percent last year. As with CEO pay, director pay is typically a mixture of cash and stock. Many companies also include additional fees for serving on a particular committee, such as the audit committee, as well as a fee for each meeting a director actually attends.
Some directors are faring substantially better. Retailer Pier One recently raised the fee it pays its directors from $33,000 a year plus additional fees for meeting attendance, to a flat fee of $150,000 a year. As a result, several Pier One directors made $100,000 more in 2007 than they did in 2006. It gets even more interesting when you start comparing what a company pays its directors to similar companies. Pier One, for example, listed 20 other retailers as being comparable to them. Yet director pay at those companies tops out at $50,000 a year.
Keep in mind that serving as a director, while much more challenging than in years past, remains a part-time job. So the next time you get a proxy statement, don’t ignore the section on director pay. It may not be as juicy as the figures for the CEO, but it really is too important to ignore.
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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism
The Reynolds Center has announced its 2009-10 free workshop schedule.
Select a workshop and register from the drop-down menu below.
The Reynolds Center registration for Fall 2009 free online seminars.
By Anita Malik
Is Water the New Oil?
By Jennifer Hopfinger
Symbolic Indictments?
By Jonathan Higuera
Don't Forget Director Pay
By Michelle Leder
Complete Gasoline Coverage
By Amy Eagleburger
Don't Forget Director Pay
By Michelle Leder
June 19, 2008
When it comes to reviewing proxy statements for details on executive compensation, most business journalists tend to hone in with a laser-like focus on the CEO, often examining various aspects of the executive’s total compensation package. Sometimes, though far too frequently in my book, the company’s other top executives face similar analysis.
But that same scrutiny is very rare when it comes to looking at how much the company’s directors make for serving on the board. And, given that directors are a key line of defense for questionable accounting, excessive compensation, and all sorts of other key decisions, such as selling the company or acquiring another company, that lack of attention is simply not acceptable.
Last year, the Securities and Exchange Commission began requiring additional disclosure on CEO pay as well as the pay for the other “named executive officers”. At the same time, they began requiring additional disclosure on director’s pay packages. And, judging by the recent crop of proxies, director pay is surging.
A recent study by Equilar found that median director compensation rose by 7.2 percent between 2006 and 2007 to $173,640 and the cash retainer portion of director compensation increased by 20 percent last year. As with CEO pay, director pay is typically a mixture of cash and stock. Many companies also include additional fees for serving on a particular committee, such as the audit committee, as well as a fee for each meeting a director actually attends.
Some directors are faring substantially better. Retailer Pier One recently raised the fee it pays its directors from $33,000 a year plus additional fees for meeting attendance, to a flat fee of $150,000 a year. As a result, several Pier One directors made $100,000 more in 2007 than they did in 2006. It gets even more interesting when you start comparing what a company pays its directors to similar companies. Pier One, for example, listed 20 other retailers as being comparable to them. Yet director pay at those companies tops out at $50,000 a year.
Keep in mind that serving as a director, while much more challenging than in years past, remains a part-time job. So the next time you get a proxy statement, don’t ignore the section on director pay. It may not be as juicy as the figures for the CEO, but it really is too important to ignore.
Copyright © 2008 Donald W. Reynolds National Center for Business Journalism