Heavier Board Responsibilities Mean Higher Director Comp

September 1, 2004 (PLANSPONSOR.com) - Serving on a corporate board is getting more lucrative these days because of the dynamics of the director market.

Hewitt Associates found that because of the greater accountability and responsibility placed on board members by recent legal and regulatory developments, director compensation is up across the board in 2004, according to a news release.

Hewitt found that the median retainer for board members grew to $40,000 in 2004 from $35,000 last year. Meeting fees were also up to a median of $1,500 per meeting from $1,250 in 2003. Meanwhile, 23% of companies increased retainers for committee chairs, with the Audit Committee Chair receiving the highest fees of $10,000 this year, compared to $5,000 in 2003.

“Recent corporate governance issues have led to more stringent requirements for board service, along with greater responsibility and risk for board members,” said Gerard Leider, senior consultant with Hewitt Associates, in the news release. “Consequently, qualified board members are cutting back on the number of boards on which they serve. This increased risk, and the economics of board member supply and demand, resulted in an increase in board pay.”

The study shows that companies are also taking a different approach with equity-based compensation practices. Stock options are less popular, with 59% of companies providing them to board members in 2004, compared to 68% in 2003. At the same time, companies are increasing restricted stock/unit awards from 27% in 2003 to 34% in 2004. Heightened attention on stock ownership has also led some companies to institute ownership guidelines for board members. Specifically, 44% of companies now have such rules, compared to 33% in 2003.

In addition to the traditional cash and equity forms of compensation, 43% of organizations provide benefits to the board and 58% offer perks. The most common benefit is travel/accident insurance (79%), while the most popular perk is a matching charitable gift program (65%).

Hewitt surveyed more than 170 major US companies with median revenue of $3.7 billion.