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Finance Execs Get Top Board Pay

Those serving on audit and compensation committees get paid more than their fellow board members, a survey says.

March 2008
by Stephen Taub/CFO Magazine

Corporate boards value finance experts over all other members, judging by a new survey from the National Association of Corporate Directors.

Audit-committee members and chairs are paid more than their fellow board members, according to the NACD's latest annual Director Compensation Survey. Among the top 200 U.S. industrial and service companies by revenue, median compensation in 2007 for audit-committee members was $10,000 on top of their base board compensation, while those on compensation committees made an extra $5,500.

Median pay was $25,000 above board-member compensation for audit-committee chairs and $15,500 for compensation-committee chairs.

A large majority of companies in all size groups, ranging from 75 percent to 84 percent, differentiated pay for service on the audit, compensation, and governance/nominating committees.

"Directors with strong risk-management backgrounds are hard to find, and audit-committee chairs are spending an enormous amount of time on committee work, even more so now with the current credit and liquidity crisis and volatility in the economy," says Ken Daly, chief executive of the NACD.

Total compensation costs for boards ranged from a median of $449,000 for the group of smallest companies surveyed to $2.02 million for the 200 largest. As a percentage of revenue at those companies, total compensation ranged from 0.19 percent at the smallest companies to 0.01 percent within the top 200.

The study found that in general, the proportion of total direct compensation (TDC) provided by the different components of board pay programs was fairly consistent across all revenue groups. For example, annual cash retainers accounted for 26 percent to 30 percent of TDC for all revenue groups, up slightly from a year earlier. The combination of retainer and board-meeting fees also grew slightly but continued to range between 35 percent and 37 percent of TDC for all companies.

Full-value shares represent the largest single component of compensation for companies of all sizes except the smallest, for which cash retainers are the largest. Generally, the value of full-value shares as a percent of TDC increases proportionately with company size.

Stephen Taub is an assistant editor at CFO Magazine.

© CFO Publishing Corporation 2008. All rights reserved.