Director Compensation Decreases, Annual National Association of Corporate Directors Survey Shows

WASHINGTON, March 29 /PRNewswire/ -- Corporate board pay levels are flat or down compared to last year, according to The National Association of Corporate Directors (NACD)'s annual Director Compensation Survey: 2009-2010.  

Created in partnership with consulting firm Pearl Meyer & Partners, the report examines director pay trends among public boards in four size categories, along with a fifth category of the Top 200 companies – ranging in revenues from $50 million to over $10 billion – across multiple industry verticals.  Data is used as an important benchmarking tool for boards to review or establish effective and competitive compensation plans.

The report also shows a link between the composition of director compensation and the current economic environment.  Cash compensation, consisting of annual retainers and fees for board and committee service, represented a greater proportion of total compensation.  The percentage of director pay in the form of equity declined significantly, largely as a result of lower share prices.  While stock compensation was generally below the 50% benchmark, there was also a significant shift away from the use of stock options in favor of full-value share grants.

"The results of the 2009-2010 NACD Director Compensation survey show not only the impact of a slowly recovering American economy but also a conscious effort by many corporate boards to effectively respond to new realities facing companies from a business and corporate governance perspective," said Ken Daly, CEO and President of NACD.  "Boards are working harder than ever to meet the challenges before them and address the needs of a corporation's multiple constituencies. We expect to see further movement from stock options to full value shares as directors show an appreciation of the current state of play and their commitment to following leading practices."

Key Highlights:

Median total direct compensation:

• Companies with revenues of $50 million to $500 million -- decreased 3% to $75,490
• Companies with revenues of $500 million to $1 billion -- decreased 6% to $108,836
• Companies with revenues of $1 billion to $2.5 billion -- decreased 2% to $131,054
• Companies with revenues of $2.5 billion to $10 billion  -- decreased 1% to $164,455
• Companies with revenues over $10 billion plus -- increased 1% to $216,186

Compensation by industry:

• Highest compensated included: Pharmaceutical & Medical Products, Diversified Financial & Brokerage, Petroleum/Crude Oil Production & Pipelines and Computer Products & Services
• Lowest compensated included: Transportation & Distribution, Motor Vehicles & Parts and Banks/Savings & Loans

From an organizational perspective, the NACD report found that the work of corporate boards is being conducted increasingly at the committee level as directors seek to most effectively address the volume of issues they face.  Virtually all companies in the survey maintained audit and compensation committees with the vast majority also having a governance/nominating committee.  A sizeable majority of companies differentiate pay among committees in some way, reflecting the difference in relative workloads.  

Continuing a practice begun in the wake of Sarbanes-Oxley, audit committee member compensation is highest, reflecting a significant rise in responsibilities and time commitment required as a result of regulation.  Compensation committees follow, due largely to increased workloads and a more intense scrutiny of their decisions by all stakeholders.  

Methodology

NACD reports director pay trends and practices for U.S. companies for all industries and by committee membership, committee Chair, region, and four revenue categories ranging in size from $50 million to more than $10 billion. The data from those revenue categories was also compared with Top 200, defined as the 200 largest U.S. industrial and service corporations whose director pay practices are tracked annually by Pearl Meyer & Partners.

The report was published with the support of NACD Alliance Partners: Heidrick & Struggles, KPMG, Pearl Meyer & Partners, Oliver Wyman, Tatum, and Weil, Gotshal & Manges LLP.

The report may be purchased by calling 202-775-0509 or online by visiting www.nacdonline.org/compsurvey2010. NACD member price: $50. Nonmember price: $150.

About NACD

Founded in 1977, the National Association of Corporate Directors (NACD) is the only member-based nonprofit organization for corporate directors providing tools, professional support and the platform for making corporate directors more effective in boardrooms across the country. With nearly 10,000 members, NACD improves director performance by empowering members through education, a forum for peers to share ideas, and an extensive knowledge base of information and publications. NACD fosters collaboration among directors and governance stakeholders to shape the future of corporate governance. Learn more at www.nacdonline.org.

NACD's Leading the Way Campaign is providing the resources for directors to strengthen corporate governance.  The organization's Key Agreed Principles for the Governance of U.S. Publicly Traded Companies represent areas where board, executive management and shareholder groups – NACD, The Business Roundtable, Council of Institutional Investors and others – have already agreed on benchmarks of good governance.  Leading U.S. corporations such as Aetna, Becton Dickinson, Dow Chemical and Home Depot are using the Key Agreed Principles as a framework to annually review and improve board performance and governance decisions.  For more information on NACD's Leading the Way Campaign and Key Agreed Principles visit www.nacdonline.org/leadingtheway.

SOURCE National Association of Corporate Directors (NACD)