Abstract: In the past year, the United States has experienced a historic change in the way its citizens view financial institutions, public corporations, and compensation design. Boards of directors, which set executive compensation and have been directly affected by this shift, are the focus of this report. In particular, the report concentrates on how board members in publicly traded U.S. companies are organized and compensated. This report uses two data sources and information about thousands of companies to provide background on a wide variety of important issues in the area.
The last few years have also witnessed an increased level of scrutiny of corporate pay, which resulted in important reforms of compensation disclosure. New transparency rules are applicable not only to senior executives, but also to directors, who, in addition to providing a total compensation figure, are required to itemize the disclosure of the single emoluments they receive from the company.
The report analyzes board structure and director compensation information regarding U.S.-based public companies. Changes in board composition and functions, on the one hand, and compensation practices, on the other, are correlated to a certain degree. More precisely, growth in director compensation, which has been observed for years across industries and revenue groups, may be the outcome of the expanding time commitment expected today from board members, as well as the potential exposure to liability resulting from more rigorous compliance requirements. Raised bars on independence and expertise have further reduced the pool of candidates, increased competition in the search for new directors, and, ultimately, may be related to increases in compensation.
Topics covered include:
- Director compensation
- Board size
- Age, diversity, and professional background
- Independence and affiliations
- Board leadership
- Majority voting policies
- Board classification
- Shareholder rights plans (poison pills)
- Frequency of board meetings and attendance policies
- Retirement policies and restrictions on multiple board service
- Stock ownership guidelines
- Director education and performance assessment
- Committee practices
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