Board of Directors' Responsibilities Intensify with Financial Crisis
In the wake of the current financial crisis, Board of Directors responsibilities will intensify and pay for performance will become more than just a sentiment. The Federal government, industry watchdog groups and shareholders will make corporate governance a critical concern in the years to come. Therefore, the Board will need to scrutinize management actions more, closely review executive compensation, and support management action in a myriad of other operational issues.
Armonk, NY (PRWEB) November 21, 2008
In the wake of the current financial crisis, Board of Directors responsibilities will intensify and pay for performance will become more than just a sentiment. The Federal government, industry watchdog groups and shareholders will make corporate governance a critical concern in the years to come. Therefore, the Board will need to scrutinize management actions more, closely review executive compensation, and support management action in a myriad of other operational issues.
In the process, the Board will spend more time on company matters, have more in-depth knowledge of company activities, and most critical, have the skill set to understand how to successfully manage the company. Accordingly, it's reasonable for each Board to periodically evaluate its own performance, consider its own structure; update the charters of its committee, and even review its own compensation.
The Board needs an objective source of information to support its decisions on key matters and Total Compensation Solutions (TCS) has developed a resource that provides that information in the new 2008 Board of Directors Compensation and Governance Survey.
TCS has produced this study on Board of Directors' compensation policies and practices since 2004. It includes data compiled from 371 organizations principally from the financial services sector and concludes that:
The average total cash compensation for the Chair of the Board of Directors grew by 15% over last year and the average total cash compensation for regular Board members grew by eight percent.
2007 2008 % Difference
Chair, $45,377 $52,131 15%
Director, $38,914 $42,138 8%
"What's interesting to note is that the trend is slowing down" says Paul Gavejian Managing Director of TCS. "In past surveys, the percent of difference reached as high as 20% for both the Chair and Directors"
The average total cash compensation for the Board Chair and Directors is higher in publicly held companies than the other organizations in the survey.
Overall, Public, Private
Chair, $52,131, $54,091, $52,291
Director, $42,138, $46,252, $26,510
"We've always presumed that the increased level of risk associated with public trading of company stock should be reflected in compensation for management and now it appears this applies to privately held companies as well" per Gavejian.
The TCS report also addresses compliance issues and reports a four percent (4%) decrease from last year in the amount of companies using Sarbanes-Oxley as their primary guidance for compliance. Many of the survey participants indicate that they use Federal and state regulations as their primary guidance and TCS observed a nine percent (9%) increase in the use of the Security Exchange Commission (SEC) for compliance.
"It's too early to know the long term effects of this year's financial crisis on the economy. However, it's almost certain that stronger regulation of the financial services industry will be mandated next year"…according to Gavejian..."we're starting to wonder if this will result in Sarbanes-Oxley-style reform."
TCS monitors these issues and can work closely with the Board of Directors and its Committees to ensure compliance with the existing rules and the appropriateness of compensation arrangements for Board members. For more information on compensation and governance trends and how TCS can assist your organization, please call us.
Total Compensation Solutions is a human resources consulting firm dedicated to assisting clients in achieving their strategic compensation objectives. The firm uses market data to identify best practices in a variety of topical areas including: board compensation; executive, middle management and staff compensation; performance management; organization structure; health and welfare; and retirement benefits. TCS gathers and reports information on compensation, personnel practices and benefits and applies the most effective, market-driven solution to each organization's unique set of circumstances. For more information about TCS, visit www. total-comp. com or contact us at:
Total Compensation Solutions
200 Business Park Drive
Suite 102
Armonk, NY 10504
Phone: (914) 730 - 7300
Fax: (914) 730 - 7303
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