The current economic turndown is credited with suppressing corporate director resignations (2010-2011) among more than 500 significant companies, one of three reasons for the smallest number of new executives joining boards in 10 years, according to a recent Spencer Stuart governance survey. The report appeared in Pensions and Investments (11/4) and was reported by the National Association of Corporate Directors (NACD) 11/7.
Motivations for turnover in the world of nonprofit boards differ, of course, but nonprofit organizations should be aware that the changes in public company culture could influence those who also sit on nonprofit boards.
Among the other reasons for fewer new directors (294) in the last decade, which Spencer Stuart said “challenged board renewal” were 1) downsizing on boards, and 2) increases in the mandatory retirement age. (In addition, public company directors are discouraged from holding more than five board seats.)
With director pay in the top 200 public companies averaging $240,000 (cash and stock) a year (total board compensation plus total committee compensation), it is understandable that a number of directors (for whom service on multiple boards is their middle years career) don’t want to relinquish such income. The compensation average for directors serving with public companies with lower revenues, with about 300 companies in each category, is less: 1) large ($2.5B - $10B), $188,000, medium ($1B - $2.5B), $172,000, small ($500M - $1B), $143,000, and micro ($50M - $500M), $101,000. (NACD Director Compensation Report, 2010-2011, in collaboration with Pearl Meyer $ Partners.)
As well, Towers Watson has reported that the annual board director “fixed” retainer is replacing board meeting fees (from 62% of firms in 2004 to 36% in 2010); committee meeting fees have decreased 64% - 40% during the same period.
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