Compensation: Grin and Bear it
from Winter 1998
by Wendy Cholbi
Well, it happened. The market dropped, bounced, dropped again, bounced again.
You get the picture.
And during that ride, directors’ compensation made like a yo-yo, too.
As Corporate Board Member reported in its third quarter issue, more and more company directors are being paid with stock. That’s great when share prices climb; less so when they tumble. Even so, most compensation experts continue to think it only fair to tie director rewards to those of shareholders. “No matter what the market is doing, it is still financially sound to link pay to performance,” insists Ben S. Cole, president of the eponymous bank compensation consulting firm in Boston.
In our story, Yale Tauber, a principal at William M. Mercer, a New York consulting firm, predicted that when stock prices fell, “you’ll hear complaints that the market is irrational and therefore can’t be used as a reliable measure of performance.”
So far, that hasn’t happened. Says Dennis Carey, a vice chairman of Spencer Stuart, the executive search firm: “I hear no one arguing for any change in the current structure of director compensation.”
