Board Pay Rising With Risk

Regulators have placed more stringent requirements on members of corporate boards of directors than ever before. In return, members’ pay is rising.

The median retainer for board members rose from $35,000 in 2003 to $40,000 in 2004, according to Hewitt Associates, which surveyed more than 170 U.S. companies.

The makeup of this board pay is changing: Restricted stock is hot and stock options are not. Board members are paid in options at 59 percent of companies, compared to 68 percent in 2003. Restricted stock is used 34 percent of the time, up from 27 percent.

In addition to dealing with vigilant regulation, board members are working more. Edward Archer, managing director at the compensation-consulting firm Pearl Meyer & Partners, tells CFO magazine that board members are dealing with “more responsibility, more time and a lot more pressure.” He estimates that “an average director of a top 200 company (largest 200 U.S. industrial and service companies) spends one-third more time on the job now than he or she spent two years earlier.”

Sibson Consulting says that the regulatory changes affecting boards are keeping quite a few workforce-management executives awake at night. It is telling clients that they can attempt to keep board pay in check by playing up the positive benefits–beyond just money–of being on a board. These include the opportunity to make contacts; the chance to make a difference in the world; and the opportunity to increase one’s knowledge and skills.