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Key Research NACD 2003-2004 Director Compensation Survey The NACD's 2003-2004 Director Compensation Survey reveals Corporate America's emerging response to recent market turbulence, heightened concerns about pay irregularities, and the introduction of new regulations related to board governance – all of which have transformed the nature of board service. Among the resulting changes in board pay programs: ¶ While overall cash compensation increased significantly, plummeting equity values left total compensation flat or down. ¶ Annual retainers and meeting fees remain the most universal components of director compensation in all revenue groups, with values directly related to company size. ¶ Provisions for additional compensation for committee chairs are increasingly being adopted across all revenue groups, with additional retainers typically equal to 10 percent of annual retainers or twice the value of committee member fees, while chairs receive a 50 percent premium over committee meeting fees. ¶ Nearly one-quarter of all companies provide different levels of compensation for committee members, with premiums most often provided for service on the audit committee. ¶ Board pensions are increasingly rare, provided by 2-3 percent of companies except among the Top 200, where prevalence is 1 percent. ¶ Overall equity use continues to grow, with grants of stock options surpassing full-value awards in every revenue group except the Top 200. ¶ Deferral plans continue to gain in use among Large and Top 200 companies where 54 percent and 78 percent of companies, respectively, allow directors to postpone receipt of compensation. ¶ Formal stock ownership guidelines or restrictions on the sale of equity are in place at half the Top 200 companies, compared to an average 14 percent of the other revenue groups. ¶ Computer products, diversified financial, and pharmaceutical companies rank as both the biggest users of stock incentives and the highest-paying sectors. Looking ahead, significant increases in director compensation and changes in pay practices are likely to continue in the 2004/2005 proxy season as boards grapple with the multiple pressures of increased regulation, responsibility, accountability and public scrutiny. For a copy of the NACD 2003-2004 Director Compensation Survey, contact NACD at 202-775-0509 or purchase it online at http://www.nacdonline.org/publications/pubDetails.asp?pubID=227 |
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