Compensation for directors of S&P 500 companies jumped to an all-time record of $251,000 on average last year to constitute a total increase of 15 percent since 2007, with one company paying directors a retention bonus of $9.5 mn, according to a study by Bloomberg News.
Fidelity National Information Services leads the list of top payers, with its $9.5 mn in yearly compensation for director William Foley, while News Corp and Costco Wholesale Corp come in second and third, paying some directors consulting fees of more than $1 mn, according to the news agency’s own data.
The average director pay at S&P 500 companies is six times higher than that of the average private sector worker in the US, while directors work, on average, between 250 and 300 hours a year compared with the average worker’s 1,789-hour annual workload.
Joel Koblentz, senior partner at executive recruitment firm Koblentz Group, says the increase in pay – the sixth consecutive average annual pay rise for directors of S&P 500 companies – partly reflects higher working hours and the risks of reputational damage from increasingly public activist shareholder campaigns, the news agency says.
The PwC 2012 Annual Corporate Directors Survey shows that 56 percent of directors report working more hours last year. Twenty percent of directors who say their workload has increased report working at least 20 percent more hours while 67 percent say they worked at least 10 percent more.
Critics, however, say high compensation for directors can reduce board performance as directors remain silent on certain issues in order to keep their posts. They also claim directors themselves are at least partly responsible for the successive compensation increases, along with rising stock prices that often figure in a director’s compensation package.
‘Who makes decisions about director pay? The directors,’ says Paul Hodgson, director of corporate governance at researcher BHJ Partners, cited by Bloomberg. ‘Shareholders can sit back and say, These directors are being paid so well that I can’t see them ever questioning management on anything because this is a gig they would hate to lose.’
The second best-paid director in the S&P 500 is News Corp’s Arthur Siskind, who received $5.2 mn as an adviser to the CEO even though he received no compensation as a director, Bloomberg reports. In third place is Richard Libenson at Costco. Libenson received $4.6 mn, including $300,000 paid for consulting services to a firm he owned and the rest in restricted stock units.
