New York (Aug. 16, 2004) -- Board members are working harder and taking on more responsibility, but they're taking home bigger paychecks for doing so, according to a new study by compensation consultants Pearl Meyer & Partners.

Following two straight years in which board pay at the top 200 U.S. industrial and service companies was nearly flat, the New York-based consultancy said that board compensation grew 13 percent to nearly $176,000 in 2003, as leading corporations moved to adapt director pay programs to a radically changed boardroom environment.

Compensation for committee service saw the biggest jump, swelling on average by approximately 35 percent to over $23,000, including a 47 percent rise in audit chair fees and retainers. Compensation committee heads saw a 24 percent pay increase.

"Board pay is catching up with the new realities of board service -- more responsibility, more time and a lot more pressure," said managing director Edward C. Archer, who estimated that the average top 200 director spends one-third more time on the job now than two years earlier. "These leading boards have moved from the rear guard into the front lines of corporate governance."

Close to half of the top 200 boards provided premiums for service on specific committees -- most commonly audit and compensation -- based on the additional time and responsibility involved. As an example, Archer noted that audit committees met an average of nine times in 2003, twice as often as five years earlier, due largely to new requirements.

Pearl reported that the use of full-value shares surpassed stock options for the first time since equity became an integral part of director compensation programs a decade ago. The percentage of pay delivered in equity – full-value shares and stock options -- declined for the second straight year, from 60 percent to 57 percent of total board remuneration. Average equity values increased 7 percent to over $99,000, while cash compensation rose 21 percent to $75,000, including a 17 percent increase in average cash retainers to $45,000.

Fewer companies granted stock options to directors -- 59 percent, compared to 70 percent a year earlier. According to the consulting firm, the change in equity use reflects a consensus among governance activists that full-value incentives better promote a long-term perspective on corporate performance. Stock option values were down over 5 percent to about $49,000, due in part to the market slump in the first half of 2003, while full-value awards rose 23 percent to more than $50,000.

The securities industry ranked first in board pay at nearly $307,000, roughly 75 percent more than the average top 200 director. Diversified financial companies ranked second in total pay, averaging $258,000, followed by health care at $255,000. The energy/utilities, food/drug store chain and transportation/delivery sectors reported the lowest levels of board compensation, averaging $124,000, $127,000 and $136,000, respectively.

-- WebCPA staff

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