Company Directors Average Pay Jumps 12% to Pass $160,000 in 2006; CEO Pay Was $7M

The average total cash and stock-based pay for the 13,000 directors of nearly 1,500 companies on Standard & Poor's indexes rose 11.6% to $160,493 in 2006, on increased workloads and responsibilities of Sarbanes-Oxley, according to Institutional Shareholder Services.

The study found that 41% had separate chairmen and CEO positions last year, up from 37% in 2005.

Only 3 of 30 Dow components have an independent chairman - McDonald's, American International Group (AIG), and Walt Disney Co. Three other Dow components - Microsoft, Intel and Wal-Mart, have insiders serving as non-executive chairmen.

The typical CEO of an S&P 500 company earned just under $7 million in 2005. 

ISS Study Highlights:

  • 54% of companies granted stock options to directors in 2006, down from a peak of 74% in 2002, on rising stock-option backdating issues and tougher corporate-governance rules. 

  • 57% of the companies have lead directors, who oversee the board's decision-making, compared with barely 3% in 2002. 

  • 70% of the companies have boards at least two-thirds filled with independent directors, or directors who have no close business or financial ties to the company.

  • 85% of companies last year have fully independent audit committees, which oversee the finances of companies, compared with 70% in 2002.

  • The number of classified boards, those with staggered terms for directors, fell to 55% in 2006 from 59% the year before. 

Institutional Shareholder Services (ISS) report 2007 Board Practices, Board Pay Study examines the board structure and compensation of boards of directors at S&P 1500 companies based on 2006 disclosures. 

Sources/Related Commentary:

Company directors' average pay passes $160,000 -

Studies: CEOs less likely to be chairman, directors' pay up -

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