As Demands on Directors Increase, So Does Pay | AccountingWEB

As Demands on Directors Increase, So Does Pay

Betsy S. Atkins, a board member of three technology companies, has seen her workload as a director triple in the post-Enron environment. The time she spends in audit and compensation committee meetings has grown even more.

This is the new reality for Atkins and many other corporate board directors, who are working harder while facing greater risks of lawsuits and a fouled reputation if something goes wrong. Companies are responding by increasing directors’ pay to recognize that the job is more difficult, more visible and more time-consuming than ever, according to the New York Times.

Atkins, who is chief executive and owner of Baja LLC, a venture capital firm in Miami, said board-related business takes up 12 business days a month. Four employees help her manage the load. "This is not your grandfather’s board, where people just showed up and voted," she said.

Two years ago, directors said they spent about 150 hours a year on board business; now it’s 250 hours. Audit committee members can expect to spend at least twice that amount, said Roger W. Raber, president of the National Association of Corporate Directors.

Edward Archer, a compensation consultant at Pearl Meyer & Partners, said total compensation for the average director last year ranged from $43,000 at small companies to $155,000 at the largest 200. Compensation, mostly in cash rather than stocks, will increase by at least 15 percent this year. He said audit and compensation committee chairmen often earn more than other directors for what Archer called "hazardous duty."

Corporate governance specialists told the Times that while a directorship still carries clout and handsome paycheck, fewer executives are willing to take on the job.

"Most searches these days are not a layup," said Dennis C. Carey, vice chairman of Spencer Stuart, an executive search firm. "The number of turndowns has increased dramatically over the past couple of years."

To recruit new board members, companies are looking beyond "marquee names" and seeking board members below the chief executive level, said Jeffrey Sonnenfeld, associate dean of the Yale School of Management. The Sarbanes-Oxley Act of 2002 says audit committee members must have substantial experience overseeing financial statements. New board members are increasingly retired business leaders and executives at the "C level," such as chief financial officers. These new directors, Sonnenfeld said, "have more current specialized knowledge and more available time."

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