from Third Quarter 2009
Corporate Board Member
by Julie Connelly
When everybody else is seeing less in the paycheck, shouldn’t directors? You’d think so, but in fact compensation surveys suggest that board members have been a little slow on the uptake here. According to Equilar, a research outfit that analyzes executive and director pay, outside directors of Fortune 500 companies actually got a raise of 4.7% last year, which lifted their annual median package to $182,102. But at the same time, the number of directors who are taking cuts is rising. In 2007, just seven boards reduced their boardroom fees. In 2008, 43 did—and the pace continues to pick up: 43 boards announced cuts in the first 10 weeks of 2009, according to Equilar.
The boards of Ford Motor and General Motors led the pack. Ford directors cut their fees from $200,000 to $100,000 three years ago, and this year, as of March 1, they eliminated the $40,000 portion that was paid in cash. At the beginning of 2009, GM’s board slashed its members’ retainers to $1 a year, the same amount the CEO gets.
The boards cited by Equilar include G-III Apparel Group (which sliced 20% off all cash compensation), Seagate Technology (15% off total board- and committee-service fees), and Herman Miller Inc. (10% off annual retainers). At XL Capital Ltd., a Bermuda-based insurance company, the directors waived their entire 2008 retainer, which had been $50,000 the previous year.
The solutions are more imaginative at other companies. JetBlue has never asked its employees to take a pay cut, although it has deferred raises. The carrier’s directors, each of whose cash and stock retainers total about $80,000, haven’t cut their pay either. But two of them, compensation committee chair Ann Rhoades, 64, and chairman Joel Peterson, 61, donated the cash portion of their 2008 pay to the company’s Crewmember Crisis Fund, which helps out employees in emergencies. That gift came to $37,000 for Rhoades and $40,000 for Peterson. “We wanted to establish solidarity with the employees,” Rhoades says. “We both thought it was the right thing.”
Meanwhile, even Fortune 500 directors who treated themselves to a raise may be doing the right thing whether they meant to or not. Roughly 60% of that extra comp is in the form of equity grants, and the recipients are encouraged to take their retainers and meeting fees in stock or stock units as well. Asked if he thought he should take a pay cut, one director snapped, “On my boards you get stock—and that’s been obliterated just like everybody else’s. I’ve taken a pay cut already.”
Related article:
Memo to Comp Committees: Don't Let Investors or CEOs Push You Around