January 30, 2018
Spotlight on the Board
Although the NASPP Conference is over, we have one last installment in our “Meet the Speaker” series, showcasing interviews with speakers at the last year’s Conference.
For today’s interview, we feature Fred Whittlesey of Compensation Venture Group, who led the session “Spotlight on the Board: ‘Gotchas’ in the Design, Governance and Administration of Director Compensation in Today’s Market.” Here is what Fred had to say:
NASPP: Why is a discussion of board compensation particularly timely right now?
Fred: Despite the focus on executive compensation, typically labeled in the media as “CEO pay,” compensation for boards of directors has not attracted a similar level of attention. Interestingly, while board compensation committees determine executive pay, they also determine their own pay. There have been few cases directly challenging board compensation, though we highlighted one in our panel presentation. Compensation professionals should expect growing scrutiny of board compensation.
But understanding director compensation is much more complex due to the combination of retainers, meeting fees, additional compensation for chair roles and committee activity. Just look at the Director Summary Compensation Table and try to understand the vast range of pay within each company.
NASPP: What is one action should companies be taking now?
Fred: I predict that the direction that shareholders and advisers will take on director compensation is the “total cost of board” metric. I’ve been advising boards on this metric for over 20 years and have never seen anyone else address it.
The question is how much should good governance cost? The number of directors, number on each committee, and number of meetings collectively have grown. While meeting fees have generally gone away, the sheer volume of directorships and pay levels is going to come under scrutiny. Every company should be calculating this number and comparing within the peer group they use for executive and board pay.
NASPP: What is the most innovative approach you’ve seen to board compensation?
Fred: I’m finally convincing boards to develop a board compensation philosophy. It’s not required, not regulated, and not subject to disclosure. Raising this issue with boards is eye-opening for them. You set your own pay. How do you determine your own pay? Is it your “independent” compensation consultant whom you hired to set executive pay and also advises you how to set your own pay? Soon shareholders and advisers are going to catch on to this practice.
NASPP: What is your favorite memory from a past NASPP Conference?
Fred: The first NASPP conference. I think everyone there realized we were at the beginning of something innovative and significant. Today, many NASPP members wouldn’t understand that there was a time when there was no NASPP or equivalent. Where did we get our information and knowledge? How did we network with equity compensation peers? How did we keep up with new developments? It’s been an amazing 25 years.
About the NASPP Conference
The 25th Annual NASPP Conference is over but it’s not too late to take advantage of the more than 50 breakout sessions on today’s most timely topics in stock and executive compensation. All the keynotes and full-length breakout sessions have been archived and are available in MP3 format; purchase Fred’s session, “Spotlight on the Board: ‘Gotchas’ in the Design, Governance and Administration of Director Compensation in Today’s Market” and any other sessions you are interested in today.