Study: CEO, Outside Director Pay Rises Across all Industries

Median total compensation for outside (non-employee) directors of U.S. boards is higher than last year's median 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 directors' compensation and board practices in 510 companies.

The oversight role of corporate boards is intensifying, resulting in significantly higher demands on board members. The chairmen of audit committees are especially under rising new pressures. These increased demands spurred the increase over the prior year of retainers paid to audit committee chairmen.

In manufacturing, median total compensation for outside directors is now $72,750, up from $69,620 in 2003. The financial sector increased from $55,000 to $67,000. Services is $70,000 this year, up from $60,000 last year. (Total compensation includes all fees, retainers, committee pay, and annual, one-time or periodic grants of stock, restricted stock grants, and the value of stock option grants.)

Median basic annual compensation (the mix of fees and retainers for board service plus committee pay) is up in all three industry sectors. Manufacturing increased from $45,000 to $50,000; financial services increased very slightly from $43,000 to $43,750; and services from $40,000 to $50,000.

CEO PAY ALSO RISES

Median total compensation for U.S. CEOs was also higher in all industries in 2003, the latest year for which data is available.

"There was generally good profit performance in 2003," says Charles Peck, The Conference Board's compensation specialist and author of the report. "As a result, annual bonus plans, which are based on profitability, paid off well in many cases."

Stock option grants, which were the road to riches for many during the 1990's, decreased in size in 2002 and even more in 2003. However, restricted stock grants were larger in 2003 than in prior years, indicating a shift in company practices regarding long-term incentives.

Total CEO compensation (salary, bonus and long-term compensation) was highest in the construction industry at $2,968,000. It was lowest in transportation at $988,000. Total current compensation (salary plus bonus) was also highest in construction at $2,445,000 and lowest in transportation at $646,000. Communications paid the highest median salary, $648,000. Lowest was telecommunications, which paid $405,000.

The report is based on data from 2,986 U.S. companies in 14 major industries and reports the compensation paid to the five highest-paid executives.

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