Gone are the days when sitting on a corporate board meant showing up for occasional meetings and collecting fat honorariums from your buddy the CEO.
Today’s boards of directors are under the microscope in the wake of the devastating corporate scandals of recent years, which found many a board asleep at the wheel while management ran the company into the ground.
New legislation puts more responsibility on corporate boards to take seriously their responsibilities to shareholders by filling their ranks with people qualified to be there—and people who plan to show up to do the job. This increased scrutiny and beefed up responsibilities are causing some boards to have trouble getting people to serve.
Some companies including Hewlett-Packard, Cisco, Adobe Systems, Franklin Resources, NetIQ and TiVo have raised the annual retainers they pay directors, especially chairs of key committees like audit, nominating and compensation, the San Jose Mercury News reported.
Others have added or stepped up the payment by as much as $1,000 or $2,000 given to directors for attending meetings while others are penalizing directors who miss a certain percentage of meetings. As a result, directors who used to spread themselves between five or six boards now don’t have the time for more than one or two.
"You really have to be more engaged to be on a board,'' John T. Thompson, vice chairman at executive search firm Heidrick & Struggles told the Mercury News, adding that his company's board-recruitment practice is 50 percent busier this year than last.
"You can't just be there for window dressing or for social reasons,'' he said.
Susan Wang, a retired Solectron chief financial officer who sits on four public company boards, including Calpine and Avanex, told the Mercury News that Enron and the passage of Sarbanes-Oxley she saw people coming to meetings unprepared and unengaged in the company. Not anymore.
"My personal belief is that all the work that we are doing now, we should have been doing anyway," Wang said.