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According to research conducted by Pearl Meyer & Partners for the National Association of Corporate Directors’ forthcoming 2013–2014 Director Pay Study, the prevalence of companies that pay directors for service on board committees among the largest 200 public companies has been declining for the past two years.
Jan Koors, managing director and head of the Chicago office at Pearl Meyer & Partners, says pay plans that have been sheared of meeting fees and committee member retainers look similar to pay plans before the Sarbanes-Oxley Act was adopted. Before 2002, board members were all paid the same amount of money in the form of a cash retainer, meeting fees and an equity component.
After Sarbanes-Oxley heaped work on audit committees, boards boosted pay for audit committee chairs and members because of the increased time and work involved. Then, after the financial crisis resulted in additional scrutiny on executive compensation and Dodd-Frank subsequently called for mandatory say-on-pay votes, compensation committee chairs and members got a raise.
But now, some boards have rethought that philosophy and have determined that they’re done with different tiers of pay for directors based on committee service, explains Koors. “The point is, you get to a philosophy that says, we think everybody’s pulling equal weight and doing equal work and will be equally liable for the decisions we collectively make, and we don’t need committee fees and meeting fees,” Koors says.