In its recent edition of BoardVision, Jan Koors of Pearl Meyer & Partners joins NACD's (National Association of Corporate Directors) Chris Clark to discuss key takeaways from the Association's 2011/2012 Director Compensation Report and focus on a particularly interesting trend in board compensation.
Before Sarbanes-Oxley, as Koors points out, board compensation tended to be one-size-fits-all, the same for every board member. When Sarbox hit the scene, the increased demands on audit committees drove initial compensation differentiation in an effort to recognize the impact on workload for those members. Before long, compensation committee pay followed suit, with the rise in pressure and visibility of that role. Today, it is common to find a three-tiered board compensation structure with audit committees at the top, then compensation committees, and all remaining committees in a third group.
Now, according to Koors, we are seeing companies moving away from this three-tiered system and committee-based compensation in favor of a simpler approach featuring larger retainers.
What's behind the shift? Not a decrease in regulation impacting board work, for sure. Koors notes the difficulty of the role and staffing it - it is tougher than ever to fill director spots with qualified candidates. Perhaps we are just bending to the realization that board positions are critical no matter what committee assignments are attached to them. Perhaps companies are finding that pay differentiation has not had a helpful or productive impact on board performance, staffing or retention.
At any rate, it is always interesting to see a reward trend reverse itself. Any board remuneration experts out there who can add their own color and context to this story?
Image: Boardroom by mrsmullerauh