Directors’ Pay Climbs on Bigger Workload

Compensation for U.S. corporate board members rose nearly 20% last year, in part because corporate governance reforms have forced directors to attend more meetings and do more board-related work, according to a survey released Tuesday by research firm Corporate Library.

The median board compensation was $801,500 in the most recent fiscal year, the survey of proxy filings from the 2,000 largest public companies found. The median is the point at which half the directors earned more and half earned less.

Individual directors saw their compensation rise 16.5% from the same period a year earlier, including cash and equity retainers, committee retainers and meeting fees, according to data from Corporate Library, based in Portland, Maine.

“I think there has been a general increase in the amount of time directors have had to spend on board business,” said Paul Hodgson, senior research associate at Corporate Library.

In fact, a survey of directors conducted by the nonprofit National Assn. of Corporate Directors released in December found that the amount of time spent per year on board matters has risen dramatically.

On average, outside directors spent 190.9 total hours in 2005 on board duties for each board they serve on, up from 155.8 hours in 2003, the association’s survey found.

Corporate boards have come under sharp criticism in recent years for being too passive in the wake of corporate accounting scandals that prompted the collapse of companies such as Enron Corp. and WorldCom Inc.

Those and other scandals prompted a wave of reforms, including the 2002 Sarbanes-Oxley Act.

Although the pay increase that directors enjoyed seems hefty, it falls short of the 30% pay increase that chief executives at the country’s largest companies received in 2004, another Corporate Library survey released last year found.

The issue of executive pay is bound to heat up this year as Securities and Exchange Commission Chairman Christopher Cox pushes to reform disclosure rules for executive pay packages. The SEC will unveil a proposed rule on the matter next Tuesday.