Director compensation rises 41% in two years

Compensation for corporate directors increased by 41% between 2002 and 2004, according to the Conference Board’s latest survey on the subject.

“It is not surprising that the compensation levels for board members are increasing much faster than wages in the broader workforce,” said Prem Benimadhu, vice-president, organizational performance. “There are two main reasons. First, directors are feeling the pressure of an increased workload and exposure to financial, reputational and personal risks. Second, companies are facing the growing challenge of finding directors with the requisite depth of knowledge and technical expertise.”

Among the 49 companies that responded to both the Conference Board’s 2002 and 2004 surveys, the average annual potential compensation for outside directors increased from $26,177 to $36,917 over this two-year period.

Directors are spending more time on board business: 52% of organizations indicated their regular board meetings have increased in length and frequency, while 71% reported longer and/or more frequent audit committee meetings.

Compensation for directors varied significantly among survey respondents depending on size, sector and industry, ranging from a low of $2,000 to a high of $235,200. The average 2004 compensation was $35,433 among all 103 survey respondents (mainly medium-sized and large organizations).

The highest average potential compensation levels for directors were found in firms in primary industries, communications and telecommunications, and financial services, real estate and holding companies.