Directors Amply Compensated Yet Seats Hard To Fill With BC-Executive Pay Graphic
NEW YORK (AP) _ Help Wanted: Fortune 500 company seeks dynamic individual for advice and decision-making. Work on average one day a month. Occasional all-expenses-paid travel for you and spouse. Attractive benefits. Salary up to $80,000 a year. Retirees urged to apply.
Sound like your kind of work? Well, it’s getting tougher to fill, even though you won’t find the job in the employment ads.
The job is occupying a seat on a typical corporate board of directors. A majority of the nation’s biggest companies say finding qualified people to recommend for election to such posts remains a perennial problem, especially during recessionary times.
″Not only has it become harder for midsize (companies) but also major corporations,″ said Lester B. Korn, chairman of the New York executive search firm Korn-Ferry International, which helps recruit board members. ″When you’re describing the job you also need to say, ’Has a high degree of aggravation. Must be capable of enduring stress.‴
Over the next few weeks, shareholders at annual meetings across the country will be electing slates of directors to set terms to govern their corporations. Directors appoint senior management, issue stock and declare dividends, among other things.
Despite their broad power, a survey set for release this spring by Korn- Ferry shows that 60 percent of Fortune 1,000 CEOs thinks finding qualified individuals is a major stumbling block in seating effective boards. Yet 55 percent of those same executives said they’ve turned down an offer to serve on a board at least once in the last year.
Perhaps partly for that reason boards have gotten smaller, declining to an average 12 members in 1990 from 13 the previous year, the Korn-Ferry survey shows.
At the same time, board salaries and fees have risen. Average compensation for directors from inside and outside the company among the Fortune 1,000 companies totaled $32,352 in 1990, including retainer and committee fees, up from $29,863 the previous year, the Korn-Ferry study said.
The bigger the company, though, the more generous the salary and benefits. Among companies with $5 billion or more in revenue, total annual compensation averaged $44,615, Korn-Ferry said. The highest reported salary was $80,035.
A separate survey from Hewitt Associates, a Lincolnshire, Ill., company that tracks employee benefit and compensation programs, also found that more than two-thirds of Fortune 100 companies last year offered retirement income benefits. That was up from 28 percent in 1985. Sixty-three percent offered stock ownership, up from 29 percent in 1985, Hewitt said.
Other extras, experts say, may include medical and dental coverage and travel expenese for the director and his or her spouse.
While pay and perks have risen steadily for most corporate board jobs over the past few years, potential candidates have been turned off by other unattractive elements of the work, experts say.
Among them: more frequent board meetings, from quarterly to monthly these days; more economic problems and complex issues with which to deal, particularly during this recession; and higher exposure to personal liability.
A major sticking point centers on the personal liability issue. Korn-Ferry said 81 percent of Fortune 1,000 companies insured their boards against shareholder suits last year, down significantly from 96 percent the previous year. Some companies are unable to get director and officer insurance at any cost due to problems within the organization, such as a loan default or bankruptcy, Korn said.
″If one makes an analysis of the compensation board members get, one can conclude easily that it’s a plum job based solely on the number of hours they work,″ said Edward Schwesinger, whose company, Strategic Compensation Research Associates of Stamford, Conn., follows executive compensation trends. ″(But) the world is getting tougher to work in and the exposure that the board members have is greater.
″They have a fiduciary responsibility to the shareholders; that’s very important to note. If their board is meeting they have to be there regardless of where they might be.
″Sure they are teleconference meetings, but it could still be a problem, especially if they’re in a different time zone.
For a CEO who serves on an average three or four boards attending monthly meetings and poring through reams of corporate documents could be a problem.
″I suspect that the directors of NCR and AT&T are spending a lot more time than they ever thought they would have,″ said Schwesinger, referring to American Telephone and Telegraph Co.’s protracted takeover bid for NCR Corp.
″I’ve gone off boards myself because I haven’t had the time,″ said Korn, a former U.S. Ambassador to the Economic and Social Council of the United Nations from 1987 to 1988. Korn has served on several board in the past few years.
Compounding the problem for corporate America’s director search is the very limited supply of potential candidates. The pool amounts to a good ole boy network of past and present CEOs or chief operating officers, sprinkled with a few dignitaries like former first ladies, movie stars and high-ranking government officials. Sometimes, companies will look for prominent experts in a variety of fields.
″You often do see the same people serving on various boards,″ said Robbi Fox, a consultant with Hewitt Associates. ″Some serve on as many as seven or eight boards.
″And if you think of a director who may typically serve on four boards on average ... there is a potential to earn almost a quarter of a million dollars a year. That’s a lot of money.″
End Adv Sunday, April 21