Tech Firms Must Love Their Directors -- They Sure Pay Them Enough

A recent BDO study of board compensation practices among mid-market public companies suggests that high tech companies must absolutely love their directors. On the whole, they pay them more than any other industry. The question is why?

This is the third year in a row that tech company board members led the race for the personal riches with an average annual compensation of $174,950 -- 6 percent up from last year, compared with an average increase of 2 percent. Not even directors at energy companies, at $139, 690, make as much. Here's the table:

Industry Director Compensation
Technology

$174,950

Energy

$139,690

Health Care

$118,235

Manufacturing

$105,200

Real Estate

$103,860

Retail

$97,380

Banking

$76,550

Other Financial Services

$68,125

Do mid-cap technology companies really deliver that much more value to the shareholder than others, once you factor out entrenched industry differences like prevailing product and service margins that directors have done next to nothing to create? Even more astounding is that 80 percent of this compensation is fixed in the form of cash or outright stock grants. Only 20.2 percent is in the form of options that would seem to have the greatest risk. It's certainly better than the roughly 16 percent that the energy industry offers or the pathetic 6 percent for other financial services, but that's like saying that your cooking tastes pretty good next to a factory burger from some chain.


Again, what tremendous value are these people delivering in their part-time positions? Want a best practice? Look at Apple. Last year its directors were at the top of the pay heap -- and 88 percent of what they got was in the form of options. That was for delivering the type of performance Apple has provided.

Want to see how entirely screwy director compensation can be? Look at this table showing compensation by company annual revenue:


At least directors for tech companies get paid more when the companies get larger, not smaller. Yet, that's cold comfort. Not that shareholders can count on executives to push for changes when the board determines salaries at the top.

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Image: RGBStock.com user mokra, site standard license.

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