Compensation for board directors decreased in 2008, survey says

Compensation for directors of the 200 largest public companies dropped to an average of $244,899 in 2008, reflecting a 2.4% decline from $250,835 in 2007, according to a new study.

It was the first decline in five years, according to the study, released today by Steven Hall & Partners LLC, a New York-based executive-compensation consulting firm.

Still, compared with 2003, the directors’ pay packages in 2008 grew 38.6% over five years.

That surpasses compensation for chief executives, which grew 17.4% over the same period.

“There is a lot of competition for the top talent who are considered experts,” said Michael Sherry, a consultant at Steven Hall & Partners.

“For example, every audit committee is required to have at least one director who is deemed a financial expert. These companies are looking for people who can bring something to the table, and they are willing to pay for it.”

Last year’s decline in compensation was a reflection of the troubled economy and decline in stock prices, Mr. Sherry said.

The use of board meeting fees, in which directors receive per-meeting fees for attendance, also declined: 37% of the companies surveyed paid such fees in 2008, down from 68% in 2003.

“With board meeting fees going out of vogue, companies have consciously shifted value into directors’ annual retainers, both cash and stock,” Steve Hall, managing director of Steven Hall & Partners, said in a statement.

More companies are paying directors a lump sum for the year, either annually or by monthly or quarterly installments, Mr. Sherry said.

“There are a lot of meetings now, especially with committees such as the audit committee and compensation committees,” he said.

“The companies found that they weren’t having attendance problems.”