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4 Board Leadership Pay Trends
I last looked at pay for board leadership a few years ago (7/05 issue), so it’s time to update the numbers. A new board pay survey from the NACD and Pearl Meyer & Partners finds average board pay is up to $113,000 for small corporations and almost double that figure ($215,000) at the 200 biggest. Chairs of audit committees received a median of $25,000 extra, and comp committee chairs $15,500. Lead directors earned a premium of 13 to 27 percent over the board average. But where are we headed in the future on board pay, and specifically pay for board leaders?
§ The days when directors could spread themselves over double-digit board seats have passed. But if boards demand that members limit themselves to three or four boards at most, basic economics will push the pay for each upward. “I believe that the compensation for board members will be increasing heavily.” Says Paul Dorf, of consultants Compensation Resources. If independent directors are expected to deliver intense, professional oversight to a small number of companies, they’ll ultimately be paid like professionals.
§ As noted, the idea that all of a board’s independent directors should receive the same pay package is fading. Boards have established that those who do more work (serving as a board leader or committee chair) should be paid for their extra effort. Audit committee chairs, especially, face a demanding job today, and receive the biggest extra slice. This is another hit to the concept of a boardroom “roundtable” where everyone is equal.
§ This ties into another trend I’m seeing – retired execs with strong skills filling the same leadership job on several boards at a time – as chair/lead director, or as chair of several audit committees. Competition for this proven talent will expand the pay gap between the board’s leaders and the other independents. A next step will be to decide that the extra skill required for these more-demanding roles in itself warrants grater compensation. “Bidding wars” for top board leadership talent is an outcome that no one will like, but could prove inevitable.
§ Meeting fees for boards continue to decline. A SpencerStuart survey finds them at just 57% of major company boards now, down from 72% in 2001. Committee leaders, especially, put in most of their time and effort outside the boardroom. With more talk between meetings, and more confabs over the phone, fussing over per-meeting pay seems hopelessly 20th Century.
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