Pay Up
from What Directors Think 2003
SURVEY SAYS: Are You Paid Enough?
No - 80%
The complexity of the new rules clearly requires directors to expend more time and energy, so it’s only appropriate to compensate accordingly. On the audit committee, we used to have two to three meetings a year lasting 90 minutes each. Now we have eight to 10 that last from two to four hours each, and that doesn’t even include preparation time. I could see higher pay for audit committee members than for other directors, and probably for the compensation committee chair too. The amount of pay for a director would depend on the size of the company. For a really large company, I could see the $150,000 range annually, because the business is probably more complex and requires more time. For an average company, I would say in the $50,000-to-$60,000 range for fees and base compensation. I’d say the additional fee for audit committee members should be around $2,000, and up to $4,000 for the chair.
William C. O’Neil Jr., 69
Retired Chairman and CEO, ClinTrials Research, Nashville
American Healthways, Central Parking, Sigma-Aldrich
There is no question that the workload has increased and there is more significant involvement in being a director today. But I’m one who believes that director compensation shouldn’t be so high that basically you become an employee. I think directors who are in it for the compensation tend not to be very good directors. And I’m opposed to any significant compensation in stock options, because it’s not the company or the management that pays the cost of these options, it’s the stockholders.
Fred Meyer, 75
Chairman, President, and CEO, Aladdin Industries, Dallas
Palm Harbor Homes, SWS Group, Westwood Holdings Group
I favor a pay structure where extra work is compensated. At an average-size company, the overall pay for a director should be in the neighborhood of a minimum $50,000. My sense is that certainly the audit committee members and chairman should get more. Also the chairs of the compensation committee and the strategic oversight committee.
J. Ernest Riddle, 61
Managing Partner, GrowthCircle Ventures, Atlanta
AirNet Systems, Danka Business Systems
Yes, pay should go up, because people are demanding more of directors and I think the responsibility has increased tremendously. My workload has increased by about 50%, primarily because so much time has been spent trying to figure out how to comply with Sarbanes-Oxley and how it fits in with all the other regulatory rules and regulations. Depending on the size of the company, I would say there should be a minimum of around $50,000 cash compensation and whatever other benefits are agreed upon. I think that requiring a board member to take part of the cash compensation in common stock is desirable, leaving the director with enough cash to pay the taxes on the stock. That puts the director in a position of ownership, as he or she should be.
Alan D. Feld, 67
Senior Executive Partner, Akin Gump Strauss Hauer & Feld, Dallas
CenterPoint Properties Trust, Clear Channel Communications
Since Enron and WorldCom, the workload has probably tripled, so compensation for directors should be reevaluated. I think generically, pay should now range from about $40,000 up for a total cash and stock compensation. For the chairmen of the audit and governance committees, it could be around $75,000.
Thomas F. Riley Jr., 58
Executive Vice President and COO, Chickasaw Holding Co., Oklahoma City
Alamosa Holdings
In recognition of more personal responsibility as well as the increased role that boards must play, I think it is necessary to increase compensation. But I don’t believe there should be a differential in pay for different jobs. I think compensation should be fairly uniform. All chairs should receive the same additional compensation for heading a committee. There has also been a move toward having a lead director. I don’t think there should be additional pay for that. In fact, I think that job should be rotated between the independent directors on an annual basis. We should not draw a distinction between various members through compensation. You don’t want to stratify the board by paying more to others.
Thomas T. Stallkamp, 57
Vice Chairman and CEO, MSX International, Southfield, Michigan
Baxter International, Visteon
I don’t think members of the audit committee should be paid more than, say, the members of the pension committee. If these things are taken to the extreme, they could cause a two-class director system. And I don’t think directors should take stock options anymore. There are a lot of differing opinions on what the combination of pay should be, but I favor giving at least 50% of the compensation in stock, deferred for tax issues as long as the person serves as a director. It’s very important that stock-ownership goals be set for directors. It’s very important.
Robert L. Burrus Jr., 69
Chairman, McGuireWoods, Richmond, Virginia
CSX Corp., S&K Famous Brands, Smithfield Foods
I believe the audit committee chairman definitely needs additional compensation, because far more time is required now. The compensation committee chairman should also get a little extra, because a lot more is required there as well. As to the amount of pay, there are a lot of variables. Clearly a directorship for GE will command much more in the way of compensation than one for a smaller company. Minimally, I’d say $50,000 to $60,000 for smaller to average-size companies, with a total of about $75,000 for meetings and other fees. And I believe directors should be required to hold stock. They’re there for the benefit of the stockholders and should be one of them. I believe in a combination of compensation. One way is 50% cash and 50% restricted stock.
Daniel J. Altobello, 62
Chairman, Altobello Family Partners, Bethesda, Maryland
American Management Systems, First Union Real Estate Equity & Mortgage Investments, Friedman Billings Ramsey Group, Mesa Air Group, World Airways
Regarding director pay in general, I think stock options have gotten a bad reputation. I think it’s a good thing for directors to be part and parcel of the company they’re representing. Of course, a problem for a director owning stock in the company is the very small opportunity to buy and sell it. If you sell it at the wrong time, even if it’s legal and proper, it could put out a vibe that there’s something wrong with the company. Perception is a dangerous thing in business today. You’re hesitant to do anything with your stock.
Nicholas A. Giordano, 60
Consultant; Former President and CEO, Philadelphia Stock Exchange
Fotoball USA, Kalmar Investments, Selas Corp. of America, WT Mutual Fund
