Total cash compensation for members of the Board of Directors in the financial services industry grew by 18% (on average) in the past year according to a new study released today by Total Compensation Solutions (TCS) a human resources consulting firm.
Armonk, NY (PRWEB) June 5, 2007 -- Total cash compensation for members of the Board of Directors in the financial services industry grew by 18% (on average) in the past year according to a new study released today by Total Compensation Solutions (TCS) a human resources consulting firm. This is a significant change in the compensation paid to outside Board members and it reflects the increased responsibilities and time commitment required of board members by Federal and state regulators. In particular, regulations imposed by the Sarbanes Oxley Act and the new SEC Compensation Disclosure rules have raised the level of transparency and openness to new heights and the increases in pay are substantial.
The 2007 Board of Directors Compensation and Governance Survey, conducted by TCS, explores how companies have responded to recent regulatory changes and includes information compiled from 332 U.S. based organizations in the banking, insurance, financial services and nonprofit industries. In addition to pay issues, TCS also observes a significant change in the way governance is applied through the various standing committees of the Board of Directors. The increased accountability of the audit, compensation and governance committees has dramatically increased the time commitment and requisite qualifications of Board members who serve on these committees.
According to the study, the impact has been significant in numerous ways including: higher financial and procedural standards, greater accountability for Board members as well as higher pay for members that serve on the Board and its committees. The latest changes in reporting requirements are the enhanced compensation disclosures including the Compensation Disclosure & Analysis (CD&A) statement, a plain English version of what the Compensation Committee considered in its deliberations with regard to executive pay.
"The 2007 proxies include a good cross section of CD&A statements that document their meetings as well as their use of peer data in the pay setting process" says Paul Gavejian, Managing Director of TCS.
"It's a paradigm shift in the disclosure rules and should help shareholders in further understanding how their management team gets paid."
TCS also studied the difference in cash compensation levels for the Chairman and Board members in publicly held and private companies. The Chairman appears to be more highly compensated in private companies and Directors are more highly compensated in public companies. While the distinction is subtle, there are measurable differences that may be attributable to higher risk associated with public disclosure.
To further understand Director pay, TCS studied the difference in pay levels for Chairman and Board members based on revenue size. The Chairman in a Large organization receives three times the pay as the Chairman of an Emerging company. Directors in Large organizations receive almost twice as much pay as Directors in Mid-Level organizations and over three times as much as Emerging company Directors.
"Even though it's an overused cliché, size does matter when it comes to paying Directors" says Gavejian. "The unique perspective of this study is that Board of Director pay is dependent on size of the organization as well as type. With more responsibility, there's more accountability and more pay."
The study concludes that Board of Director Compensation and Governance are currently being driven by the regulatory agencies and each company's will to apply best governance practices. The market expects that all companies will continue to comply with the new rules and regulations and the impact of this compliance will be a significantly higher cost in Board related expenses.
Copies of the 2007 board of Director Compensation and Governance Survey are available from TCS (www.total-comp.com). If you have questions regarding this report, please call TCS at (914) 730-7300 or email questions.
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. With client interaction, 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. From offices in Armonk, NY and Los Angeles, CA, TCS is able to link with clients via traditional and online media. For more information about TCS, visit www.total-comp.com or contact us at:
Total Compensation Solutions-East
200 Business Park Drive
Suite 102
Armonk, NY 10504
Phone: (914) 730 - 7300
Fax: (914) 730 - 7303
Total Compensation Solutions-West
2156 Alcyona Drive
Suite 100
Los Angeles, CA 90068
Phone: (323) 461 - 3566
Fax: (323) 461 - 5590
Questions:
Tom Bailey - 914-730-7300
www.total-comp.com
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