Compensation Slid for Midmarket Manufacturing Board Members

Dec. 16, 2009
Don't expect declines to continue, BDO Seidman advises.

Compensation for board members in the manufacturing industry followed the general trend of manufacturing during fiscal 2008/2009 -- it fell.

According to the findings of BDO Seidman's annual board compensation study, manufacturing companies decreased board compensation by approximately 6%, bringing it to $75,980. The value was comprised of 49% cash compensation, 39% full-value stock awards and 12% stock options, according to the accounting and consulting organization.

The data are for publicly traded companies with annual revenues below $1 billion. It does not include compensation provided for committee service.

How does the compensation compare with other industries? Technology offered board members the most lucrative compensation. The average annual compensation for board members in this industry was $142,370. On the other hand, a much smaller percentage (30%) was cash compensation, with 33% of the compensation coming by way of full-value stock awards and 37% in stock option awards.

Technology employed the smallest percentage of cash in compensation plans compared with other industries and the highest percentage of equity, BDO Seidman data show.

In addition to manufacturing, compensation in the financial services sector and real estate also declined. The 10% decline in the financial services industry was the biggest decrease.

Don't expect the declines to continue, however. "While director compensation is down in some industries, we expect to see it rise across the board as we emerge from the recession and depressed equity values normalize," according to Derrick Neuhauser, chairman of the BDO Global Equity Team. "Higher compensation will also be necessary to support the greater workload and increased responsibility of board directors -- a trend that started with Sarbanes Oxley and has been magnified in recent months."

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