The study is based on compensation data filed in 2008 by 2,319 SEC-registered companies and compiled by Salary.com. Board practice analysis was also based on a June 2008 survey of 249 corporate secretaries conducted by The Conference Board. Companies were categorized into 22 industries and 10 revenue groups.
Median total compensation varies from a low of $37,239 in the commercial banking industry to a high of $151,550 in the food and tobacco industry. Board members in the energy industry receive the highest compensation ($383,907 at the 90th percentile).
Total compensation rose in 2008 in 15 of the 22 industries surveyed. "Directors keep making more money, but the growth trend we have documented in the last few years seems to be slowing down in 2008," says Matteo Tonello, Associate Director, Corporate Governance Center at The Conference Board, and one of the authors of the report. The largest increase occurred in the energy industry (+12.6 percent). However, a considerable degree of variation exists across industries and revenue groups. Compensation mix (cash retainer, meeting fees, full-value stock and stock options) also varies from industry to industry, but remains fairly stable across company size groups. The cash component generally increases as companies get larger, while the percentage of compensation coming from stock and stock options remains relatively stable.
Service on one of the major board committees is compensated with an additional fee, with chairs and members of audit committees generally earning more than chairs and members of compensation committees or nominating committees.
Bigger Boards are More Diverse
Most companies have between nine and 12 board members. There is little variation in the number of directors from industry to industry, but boards tend to be bigger in larger companies.
Bigger companies are also more likely to have diverse boards. Companies with revenues over $9 billion are more likely to have at least one woman (100 percent), one academic (55.6 percent) and one African American (88.9 percent) on their boards. As revenues decrease, the presence of minority representatives becomes more sporadic.
Adherence to Independence Standards Continues to be Widespread
Since the corporate scandals of 2001-2002, there has been a growing trend toward board independence. About 70 percent of board members across industries are independent under major securities exchange listing standards, and the percent of independent directors is correlated with company size. Most boards only count one to two members who are employees or otherwise affiliated (for example, a former employee or someone providing professional services, such as legal or management consulting). As many as four out of 10 board members have retired from a previous career and become professional directors. The majority of companies permit directors to also serve on three or more additional for-profit boards, although restrictions are more severe (one or two more boards, at the most) for inside directors.
Bigger companies are more likely to appoint a lead or independent director. However, the higher a company's revenue, the more likely it is to have a CEO as chairman of the board.
Staggered Board Structures are Becoming Increasingly Rare Among Larger Companies
In recent years, shareholder resolutions requesting to declassify boards have received increasing support, therefore determining a steady decline in staggered structures. However, findings for 2008 indicate considerable variation in this area across revenue groups. The lowest percentage of classified boards was documented for companies in the highest revenue categories, which, in fact, tend to be more subject to shareholder scrutiny.
Retirement Policies are Common
Retirement policies, based on tenure or director age, are being adopted as a way to improve the dynamics of board composition. The percentage of boards complying with such policies is lowest for companies with revenues lower than $120 million (21.9 percent), and highest among companies with revenues higher than $9 billion (more than 90 percent). The median age of directors ranges from the mid 50s to mid 60s, while the median mandatory retirement age is 72. Directors of smaller companies tend to be younger.
Attendance Fees are Paid to Promote Participation
On average, directors meet between seven and 10 times annually, with little variation among industry groups. To encourage participation, the majority of companies pay meeting attendance fees.
