Tag: Board of Directors

Want to Join a Corporate Board? Here’s How

As scrutiny of public company leadership increases, corporations are feeling the pressure to get out ahead of criticism by examining and adjusting the makeup of their boards. This makes 2020 a great time for business leaders interested in joining corporate boards—including professionals from nontraditional backgrounds and underrepresented groups—to make the jump into one of these high-profile roles.

In the past, company boards recruited nearly exclusively from the ranks of current or retired CEOs, CFOs or existing board members. Now, several trends are converging to make board membership accessible to a wider range of candidates than ever, increasing the chances for business leaders who haven’t served in the C-suite.

First, research continues to show that increased diversity in the boardroom is connected to stronger corporate performance. And diversity isn’t just about gender and ethnicity—candidates with disparate ages, experience levels, and professional or economic backgrounds offer valuable insights and skills that are particularly welcome, if not critical, in today’s business environment. One study of Fortune 250 companies found that having a variety of experiences and perspectives at the table allows companies to better understand opportunities, anticipate challenges, and assess the various risks, consequences and implications of possible actions. Nontraditional candidates can use these findings to their advantage.

Time Demands Lead to Offline Meetings, Resignations

Increasing demands on directors’ time are prompting boards and committee chairs to regularly hold ad hoc “meetings between the meetings,” as directors call them, ranging from quick, 30-minute discussions to lengthier deep dives, as boards grapple with packed agendas that leave little room for broader emerging issues. Research suggests that increasing time demands — whether from official board meetings or shorter, informal ones — are also leading to directors’ resignations from boards.

But many directors say the additional meetings are necessary to fulfill their oversight responsibilities. In addition to the formation of temporary committees and the proliferation of offline conference calls, committee chairs are also working to make their meeting agendas more adaptive so directors can focus on key issues as they emerge, while pushing routine business — barring something critical — into preparatory reading material or to a between-meetings call. That flexibility allows committees to avoid situations in which discussion of regular agenda items during audit committee meetings, for example, leaves only seven minutes at the end for cyber risk.

More Long-Tenured Directors Heading for Exits

Directors with decades of experience as well as those in their 70s are retiring or opting not to stand for reelection. Meanwhile, new board appointments show that searches are prioritizing gender diversity, technology and cyber security.

According to public company intelligence provider MyLogIQ, in the past six weeks, the boards of AutoZone, Campbell Soup Company, Cigna Corporation, Microsoft Corporation, NRG Energy and Walgreens Boots Alliance announced the departures of directors with at least a decade of service under their belts or directors in the age range of 70 to 75, which is often the span in which a mandatory retirement age is selected for boards with such policies.

In addition, Pfizer and Intel Corporation both underwent board leadership transitions. Pfizer executive chairman and former CEO Ian Read announced that he would step down from the board effective Dec. 31, 2019. Current CEO Albert Bourla will become chairman effective Jan. 1, 2020. Intel lead director Aneel Bhusri announced that he would retire from the board on Nov. 1, 2019. Bhusri will be replaced by Omar Ishrak, who serves on the board’s executive committee and co-chairs the corporate governance and nominating committee.

Eyeing Lawsuits, Boards Tighten Limits on Director Pay

Boards are continuing to adopt limits on the amount of compensation directors can earn in a year to protect against pay lawsuits alleging breach of fiduciary duty. However, as more suits have progressed, some boards are implementing new limits that appear to be trending lower than those adopted previously, and a few boards have even reduced existing limits.

For instance, the Synaptics board had previously adopted a $750,000 limit that applied to equity grants awarded to directors in a fiscal year. Starting in 2019, however, the $750,000 limit will now apply to cash and equity paid to directors. Similarly, the Alnylam Pharmaceuticals board adopted limits in 2016 covering the maximum number of shares of common stock that could be awarded to directors in initial and annual stock option grants. In 2018, the board reduced the number of options grants to directors and implemented new, lower limits based on the reduced options grants and adopted an aggregate limit covering the maximum number of shares that could be awarded to the full board.

These Companies Paid Their Boards Over $10 Million

Chief executive officer pay levels have become part of a heated debate about how much public company leaders should be paid. Some packages have risen into the tens of millions of dollars each year. Shareholder groups have tried to block these large pay packages, but almost entirely without success. CEOs at big companies do work hours that some admit can stretch to 60 or more a week. Boards of directors of these companies, on the other hand, attend a handful of meetings a year, often as few as one per quarter. In some cases, the modest work has been rewarded with huge sums of compensation. Several companies paid their boards over $10 million last year. Here is a list of 25 boards of directors with shocking pay packages.

Directors do need to work between meetings to prepare for them. At some companies, mergers and acquisitions activity, financial audits and executive compensation meetings do take up additional hours. Compensation for these usually comes in packages that include both cash and stock awards or options. However, public companies that made $10 million in aggregate compensation to their boards numbered nine last year, according to data from MyLogIQ.

At the top of the list is Tesla. The total compensation of its 10-person board reached nearly $61 million. Note that CEO Elon Musk does not receive money to sit on the board.

These Are the Highest-Paid Corporate Board Members in the U.S.

At a number of major American companies, compensation for board of director members has come under fire from shareholders in recent years. While director salaries remain a small fraction of CEO salaries (these are the highest paid CEOs at America’s largest companies), they have steadily risen over the past decade. In several recent instances, shareholders have even pursued litigation against – what they consider to be – excessive board compensation.

According to data from public company intelligence provider MyLogIQ, the average compensation of nonexecutive board chairpersons at Russell 3000 companies was $330,782 in fiscal 2018. At 18 public companies, the nonexecutive chair of the board made over $1 million.

At a public company, the board of directors is a supervisory body appointed by shareholders to act on their behalf and oversee the activities of management. The chairperson is chosen by the board and is typically responsible for setting the agenda and presiding over meetings. While some companies have combined CEO-chair roles, the majority of large corporations separate the two positions, maintaining certain checks and balances between the branches of corporate governance.

Board Members Who Make More Than $1 Million

At a number of major American companies, compensation for board of director members has come under fire from shareholders in recent years. While director salaries remain a small fraction of CEO salaries (these are the highest paid CEOs at America’s largest companies), they have steadily risen over the past decade. In several recent instances, shareholders have even pursued litigation against — what they consider to be — excessive board compensation.

According to data from public company intelligence provider MyLogIQ, the average compensation of nonexecutive board chairpersons at Russell 3000 companies was $330,782 in fiscal 2018. At 18 public companies, the nonexecutive chair of the board made over $1 million.

At a public company, the board of directors is a supervisory body appointed by shareholders to act on their behalf and oversee the activities of management. The chairperson is chosen by the board and is typically responsible for setting the agenda and presiding over meetings. While some companies have combined CEO-chair roles, the majority of large corporations separate the two positions, maintaining certain checks and balances between the branches of corporate governance.

Boards Expand to Open Seats for New Directors

In recent weeks, several boards have grown in size to bring on new directors.

According to SEC filings analyzer MyLogIQ, boards of such companies as Ball Corporation, Micron Technology and Oracle amended bylaws dictating board size in order to appoint new directors, while Cintas, Ford Motor Co. and General Mills expanded without needing formal votes on bylaws.

All the new directors appointed to the preceding boards are women, and in the case of Ball Corp., the appointment of Betty Sapp — former director of a joint Department of Defense-Intelligence Community organization — brings the percentage of women on the board to 40%. General Mills’ June 24 appointment of former McKinsey & Company leader Elizabeth Lempres brings the percentage to 46%.