CEO Pay Increases, Outside Director Pay Also on The Rise

Median total compensation for outside (non-employee) directors of U.S. boards in 2003 is up from last year in all three major industry sectors covered in The Conference Board's annual study of outside director pay. The study is based on a survey of director compensation and board practices in 606 companies.

The increased scrutiny of corporate governance practices in the wake of the recent scandals has put increasing pressure on members of boards of directors. Audit and compensation committees are especially under pressure to observe rigorous standards. As a result, retainers for these two committees have increased over the last year, driven by the principle that increased performance deserves increased pay.

In manufacturing, median total compensation for outside directors is now $69,620, up from $55,700 in 2002. The financial sector increased from $41,450 to $55,000. Service was $60,000 this year, up from $48,400 last year (total compensation includes all fees and retainers, annual, one-time or periodic grants of stock, restricted stock grants, and the value of option grants).

Median basic annual compensation, the mix of fees, retainers and committee pay is up in all three industry sectors. Manufacturing increased from $39,000 to $45,000, financial services from $31,600 to $43,000, and service from $35,700 to $40,000. The table on the next page compares median basic compensation and total compensation for 2002 and 2003 in the three major industries.

CEO PAY ALSO RISES -

Median total compensation for CEOs was higher in all industries in 2002 (the latest year for which official data is available) except telecommunications, which declined, The Conference Board reports.

"Although the economy was sluggish during 2002, there was general improvement over the prior year," says Charles Peck, The Conference Board's compensation specialist and author of the report. "Since a substantial amount of executive pay relates to annual performance, this improvement probably accounts for the increase. However, stock option grants, which were the golden-egg goose during the 90's, were smaller in the majority of industries. This may signal a trend away from using this device."

Total CEO compensation was highest in financial services at $2,512,000. It was lowest in wholesale trade at $893,000. Total current compensation (salary plus bonus) was also highest in financial services at $1,524,000 and lowest in computer services at $656,000. Communications paid the highest median salary - $625,000. Lowest was computer services, which paid $400,000.

The report is based on data from 2,877 companies in 14 major industries. It reports total compensation (salary, bonus and the value of long-term incentives), total current compensation (salary plus bonus) and salary for companies' five highest-paid executives.

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