Bigger Workload Means Better Compensation for Independent Directors | AccountingWEB

Bigger Workload Means Better Compensation for Independent Directors

Long gone are the days of attracting marquee names to corporate boards with the promise of generous compensation for one or two days of work a month.

Corporate reform has meant longer hours, more board meetings, a burdensome workload and huge responsibilities.

An analysis of 2004 compensation data shows companies are paying their independent directors far more for the increased duties and heightened risk. According to Pearl Meyer & Partners, the New York compensation consultant, pay rose 13.4 percent to $177,000 for "non-employee" directors at the top 200 U.S. companies, the Financial Times of London reported. Fees paid for attending committee meetings jumped by more than a third.

"It is like hazardous duty pay," said Edward Archer, managing director of Pearl Meyer & Partners. "They are worried about the risk to their reputations as well as legal liability from the fact that they have to put their name on the dotted line."

Pearl Meyer said criticism of companies’ reliance on pensions, variable attendance fees and share options meant most companies are now issuing shares to directors with a fixed annual retainer. The new arrangement at Goldman Sachs, for example, offers directors restricted stock worth $280,000 a year plus a retainer of up to $100,000.

Those fees are just a fraction of the costs of insurance required to give the directors legal protection. While General Electric, for example, pays $250,000 to its 12 independent directors, it spends $25.2 million on insurance for directors and officers.

Archer contends board directors are still relatively underpaid, considering the expertise they bring to the companies. In 2001, Pearl Meyer estimates directors put in an average of 150 hours a year, including 60 hours of meetings. Today, it is more like 200 to 250 hours with 80 or 90 hours of meetings.

"Compensation committee meetings used to be 45 minutes to an hour and a half on average. Now they are more like 2 1/2 hours and the notebook that goes out beforehand is 50 pages thick," Archer told the Financial Times. And no one seems to be scrambling for the hot seat: chair of the audit committee.

Archer said, "Who wants to do a job like that for another $10,000 a year?"

Wait, there's more!
There's always more at AccountingWEB. We're an active community of financial professionals and journalists who strive to bring you valuable content every day. If you'd like, let us know your interests and we'll send you a few articles every week either in taxation, practice excellence, or just our most popular stories from that week. It's free to sign up and to be a part of our community.
Premium content is currently locked

Editor's Choice

WHAT KIND OF FIRM ARE YOU?
As part of our continued effort to provide valuable resources and insight to our subscribers, we're conducting this brief survey to learn more about your personal experiences in the accounting profession. We will be giving away five $50 Amazon gift cards, and a $250 Amazon gift card to one lucky participant.
This is strictly for internal use and data will not be sold
or shared with any third parties.