Corporate Directors: More Responsibility Brings More Compensation
With all of the additional scrutiny being placed on corporate Boards of Directors, and the additional responsibility imposed on them by Sarbanes-Oxley, compensation rates for directors is reaching an all time high.
For example, shareholders of Computer Associates are scheduled to vote this week on whether or not to give corporate directors a 60% pay increase - to $150,000 each - to fulfill their fiduciary role for the company.
On average, director's pay rose about 10% last year, and Robin Ferracone, a worldwide partner with Mercer Human Resource Consulting, predicts another 15% raise this year.
"We are starting to see some real movement in directors' pay," Ferracone told Reuters.
Experts estimate that the time commitment from corporate directors to fulfill their duties has increased about a third, up from 180 hours per year to about 240 hours a year. These extra time commitments stem from both additional Sarbanes-Oxley requirements as well as increased levels of decisionmaking and monitoring of their companies activities as a result of the increased expectations of the investing public.
Charles Elson, who is the director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, is expressing caution about the increased fees paid to directors, which in some cases can rise to $300,000 (in cash and deferred stock) or more. "The fear is that someone begins to depend on this thing as their full-time income and that is when they are no longer monitors, they become management," said Elson.