A recent AP article reported that director workload and pay has been increasing in recent years.  Median director pay has risen to $100,000.  Causes cited by the article include:

  • A shortage of good candidates for director positions.
  • Fewer directors are serving on multiple boards. 
  • Potential for personal liability stemming from corporate law changes made by Sarbanes-Oxley.
  • Increased workload.  Average director workload has increased from 150 to 200-225 hours per year.

Note that the first two reasons overlap.  According to the article 19% of board members serve on more than one board.  It doesn’t say what the percentage was previously, but apparently it was greater than 19%. 

The third reason makes a lot of sense.  A director should be compensated for taking on increased risk of personal liability.  While Sarbanes-Oxley has most likely prevented some abuses from occurring, the cost of compliance (including higher pay to directors because of the potential for personal liability) is costly to corporations and, ultimately, shareholders.  Lower shareholder return is the dark side of increased regulation. 

I found the fourth reason very interesting although for different reasons than those for which it was mentioned in the article.  You see, my mind has a funny way of performing mathematical computations without me telling it to.  When it saw the average annual workloads, it automatically did some math to convert them to annual workload equivalents for a full-time job.  Assuming an annual workload of 2400 hours (high for some jobs but about right for my line of work), the average director position is about 8.8% of a full time job.  Multiplying by the median director compensation of $100,000, an average director should earn about $1.1 million if he was able to do director work full time. 

$1.1 million is not a bad year. 

Are any directors trying to make a full time job out of being a director?  No.  It would require serving on 11 boards to be a full-time equivalent job.  As mentioned above, only 19% of board members serve on more than one board.  Out of the 22,000 directors in the report cited in the article, only 300 serve on even four boards. 

While there’s no such thing as a “full time director,” a director hardly needs to work full time to earn a full time salary.  Those 300 directors serving on four boards should earn about $400,000 for 850 hours work (assuming average pay and workload). 

Seems like a decent living to me.