Administration February 9, 2007

Composition and Compensation of Board of Directors Changing

September 26, 2005 (PLANSPONSOR.com) - A new survey found that many top companies are creating a new leadership position, lead director, to share duties with the chairman of the company's board of directors.
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According to a Frederic W. Cook & Co. news release, its new survey on executive compensation practices found that 40 of the top 100 NYSE companies and 27 of the top NASDAQ companies have already created the new position, which usually offers additional compensation in the amount of $15,000 to $20,000.

Beverly Aisenbrey, a managing director at Frederic W. Cook, said in the news release, “The birth of the lead director trend is in response to increasing shareholder demand for truly independent boards to ensure that shareholder interests, not management self-interests, are first and foremost in corporate governance.”

In addition, the survey found that the companies are restructuring the compensation for their boards of directors, such as paying fees for serving on a committee, to match the changing operations of boards in light of new corporate governance regulations.  

Other results of the survey, according to the news release, include:

  • In response to FAS123, which requires companies to report the cost of stock option grants, less companies are awarding stock options to directors.   Eight of the NASDAQ companies, and 10 of the NYSE companies have stopped granting options to their directors.
  • Total compensation increased 17% at the NYSE companies, and 4% at the NASDAQ companies.
  • Companies commonly require directors to maintain share ownership levels: 26% of the NASDAQ and 67% of the NYSE companies have either formal ownership guidelines or share retention requirements.

The report on the survey can be found  here .  

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