Harder Work by Directors Not Always Financially Rewarded

January 6, 2004 (PLANSPONSOR.com) - Corporate directors labored longer and harder during 2003, but that didn't necessarily translate into higher compensation packages, according to a new study.

According to the PricewaterhouseCoopers Management Barometer, almost two-thirds of directors spent more time carrying out their duties, but compensation only went up at one in five companies involved in the survey. Board compensation was flat at nearly half the responding firms. Those getting a raise enjoyed an average hike of 17.9%.

The poll found that 62% of boards concentrated more heavily during 2003 on corporate governance – including 30% that spent much more time and another third that spent somewhat more.

Looking ahead, only 10% of companies plan to hike board compensation in 2004, with an average increase of 10%. Compensation will stay about the same for 42% and none will receive a pay cut. The remaining 48% were either not certain or did not report.

Between the past year and the next 12 months, a net of only 24% of boards will have received increased compensation, 92% of which put in added time and effort.

Also, stepped-up board responsibilities had a mixed impact on recruiting new personnel. While nearly a third (28%) reported no problems, 18% had recruiting woes. Some 27% did not need to recruit new members and 27% did not report.

Audit Responsibilities

For board audit committees, whose duties have been significantly increased by the Sarbanes-Oxley Act, 68% spent more time, including 42% much more time, and 26% somewhat more, the survey found. Five percent spent about the same time, and none less time.

Despite the added workload, total compensation for audit committee members stayed about the same for 41% of companies surveyed. Only 6% received greatly increased compensation and another 16%, somewhat increased remuneration. None took a pay cut, 14% were not certain, and 23% did not report. For those with an increase, the average hike was a substantial 26.2%.

For 2004, 10% of companies plan higher compensation for audit committee members, with an average hike of 9.7%. Compensation will stay about the same for 42%, and none will receive a pay cut.

Ninety-four percent of audit committees slated for an increase had devoted greater time commitment and effort. However, only 14% of audit committees putting in more time and effort are to receive a raise, including 6% that got one in the past year.

PricewaterhouseCoopers’ Management Barometer is a quarterly survey of top executives in large, multinational businesses spanning technology, financial services, and consumer and industrial products and services. It is developed and compiled with assistance from the opinion and economic research firm of BSI Global Research, Inc., which interviewed 177 US-based CFOs and Managing Directors in the third quarter of 2003.