Audit Committee Chairs Fetch Higher Fees

For my money, the National Association of Corporate Directors (NACD), puts out some of the most useful reports of any organization or firm. I find myself going back to their research on corporate director activities, compensation, and concerns numerous times each year for numerous articles I write for different publications.

Of course, I get these reports for free. Companies, on the other hand, pay their corporate directors a fair amount of money – or so it seems, until one crunches the numbers a little more deeply.

The big news in the 2007-2008 NACD report on director pay is that committee chairs are being paid significantly more than their colleagues on the board. Median audit committee chair compensation, for example, was $25,000 “above and beyond their board member compensation.” This press release does not have what I believe most readers really want to see: what, exactly, is the median board member compensation?

That information is enticing because several other figures are surprising: directors spend an average of 207.4 hours (or five-plus 40-hour weeks) per year on board work. Even more interesting: the total cost of board compensation ranges from a median of $448,808 at smaller companies to a median of $2.02 million at the largest 200 companies. As a percentage of revenue, though, these fees are paltry (0.19 percent at smaller companies; 0.01 percent at the largest 200 companies) in light of the responsibilities, and risks, of the position.

If the board takes its job seriously, that sounds like a bargain. You’re telling me it will cost me a miniscule sliver of our revenue for rigorous oversight by a seasoned collection of business and industry veterans who advise, grill, and drill our executives on the way we balance risk and opportunity? Deal! On the other hand, that miniscule sliver sounds like its not enough for what shareholders, employees, and other stakeholders expect from the board. Yikes, now I sound like a compensation consultant.