Boards Keep Pay (Their Own) Under Control

Shareholder advocates and other critics of executive compensation have zeroed in on C.E.O.'s. Little attention has been paid to board pay. Happily, it's not out of whack, at least according to a new study by an independent research firm.

A review of 3,000 public companies by The Corporate Library found that an average of about $1 million was spent on total board compensation in 2006.

The study examined cash payments, equity awards, and changes in the value of pensions and non-qualified deferred compensation, according to author Annalisa Barrett, senior research associate.

Almost one-third of the companies studied paid less than $500,000 to compensate their full board last year. The average number of paid directors is 8.

But a handful of companies paid out $2 million in cash to directors in 2006. They included American International Group, Honeywell International, and Northrop Grumman.

Valero Energy, the San Antonio-based oil refiner, also paid $28.5 million to former C.E.O. William E. Greehey - money the company said he earned as the chief executive, but was listed under director compensation because he was serving as board chairman in 2006.

"The findings show that, with the exception of a few outliers, most companies are not spending an unreasonable amount on their boards," said Barrett.

In a departure from the norm, six companies offered their full boards a cash bonus based on company performance - including MFA Mortgage Investments, National City Corp., and the Commerce Group.

The good news is that more companies are setting up stock ownership guidelines for directors. Barrett says that helps to align directors' interests with those of shareholders. Last year, 46 percent of companies did so, compared with 29 percent in 2005.

by Elizabeth Olson