Board of director members are seeing smaller pay raises compared with last year, which continues the trend of smaller increases in board compensation since 2008, according to a study by Total Compensation Solutions, an independent human resources consulting firm.
Prior to the recession, pay for directors had been growing by approximately 15 percent per year for at least ten years. When comparing board compensation on a matched sample, meaning the data is based on the same companies in both years, the average total cash for directors is flat while total cash for the chairman of the board increased by 1.7 percent in the past year.
Along with studying compensation, the survey reports on a major change regarding applying governance through the various standing committees among board of directors. With the greater accountability of the audit, compensation and governance committees, there is a much larger time commitment for board members serving on these committees. Directors' compensation appears to be driven by market conditions along with the efficiencies a company can realize with organized board participation.
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The survey also reveals slight increases in annual retainers as well as per-meeting fees but a decline in the average number of board meetings, directly affecting directors' total cash compensation, which is defined as total cash as the sum of annual retainer and per-meeting fees.
"The rate of growth in pay seems to be related to improved operations, not a reduction of workload," says Paul Gavejian, managing director of TCS. "While some companies reduced the number of regular board meetings and committee meetings, most companies are meeting on the same day and maximizing the time of directors who serve on these committees."
This cuts the amount of per-meeting fees a company must pay its directors if those meetings were held on other days; thus, the boards are recognizing efficiencies indirectly related to market conditions.
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