Surprise! Women on the Board Earn More


A recent study shows that in corporate boardrooms, female directors actually make more than their male counterparts

There's a new gender gap in the boardrooms of Big Business. And it's not the one you think. A new survey on corporate board pay has found that the median compensation for female directors is actually higher than that for male directors.

In its annual director pay survey, The Corporate Library, a corporate governance and executive compensation research group, reports the median earnings for female corporate directors is $120,000. That's about $15,000 higher than the median total compensation for male directors, which is $104,375. "I was so surprised by the statistic," says Paul Hodgson, senior research associate for The Corporate Library, who authored the study, which looked at the pay of more than 25,000 directors at more than 3,200 companies.

Not that women's representation on boards is that exceptional. Some 91% of S&P 500 companies have at least one woman, according to executive search firm Spencer Stuart. (Apple (AAPL), Bear Stearns (BSC), and Countrywide Financial (CFC) are currently among the women-free boards.) But just 15% of boards have three or more female directors, even though the average board has 11 members. While companies may be clamoring to inject diversity into their director ranks, the reason for the difference in pay likely can't be attributed to competition over qualified candidates, Hodgson says. Generally, basic cash fees and stock grants are similar for a board's members. "There's very little leeway given to bumping up compensation for individual directors," Hodgson says. "You can't offer more to a diversity candidate just because they're a diversity candidate."

Sarbox Effect Tails Off

What does differ are the fees paid to committee members—the audit and compensation committees pay the most—and, of course, the pay for committee chairs, independent lead directors, and chairmen. Hodgson theorizes that boards, eager to get female representation across the board, assign more women to multiple committees, earning them extra fees. He also says the pay differential appears most among smaller companies, where good governance practices, which include concerns about getting diverse input on several committees, tend to be better.

Overall, the median total compensation for all directors rose 12% from the year before to $100,031. (Due to a lack of gender data, the medians are higher for both men and women because they were based on a slightly smaller sample size.) That's a slowdown from last year, which saw a 20% rise in director pay. Hodgson chalks up the slowing growth to a greater distance from the "governance disasters" that prompted some of the corporate scandals in the early part of the decade. That increased the pressures on director accountability and responsibilities, driving up pay. "Sarbanes-Oxley was back in 2002, so we've had a few years for that to play out and solidify into more regular rates for directors," he says.

Some numbers, however, did increase dramatically this year. More than 80 directors made more than $1 million in total compensation for a single board seat, up from just 18 identified last year. According to The Corporate Library, the two most highly paid directors who were not chairmen or former CEOs are Thomas Smach of footwear phenom Crocs (CROX) ($5,479,347) and John Gillespie, a director at White Mountains Insurance Group (WTM) ($4,390,699). Total compensation figures include cash fees, stock and option awards, non-equity incentive compensation, any change in pension values and deferred compensation plans, and "all other" compensation.

Year-Ago Comparison Tricky

While the number of directors with more than $1 million compensation for a single board seat made a huge leap, Hodgson is careful about drawing comparisons. New Securities & Exchange Commission disclosure rules provided much more clarity on directors' total cash earnings and the value of additional benefits. In the past, Hodgson and his team had to calculate compensation, and so the actual number of $1 million-plus members may have been higher last year than it had previously calculated. Some of the perks directors receive—free air travel for many airline directors, for instance—were disclosed in the past, but not assigned a value.

In addition, as executive turnover continues to climb, Hodgson guesses there may be more former CEOs in the chairman role. Compensation left over from the executive suite, such as stock grants that vest after leaving office, could be impacting the number of highly paid directors. Nine of the 25 most highly paid directors this year are also former CEOs.

Besides the surprising gender gap, The Corporate Library study produced a few other intriguing findings. The median cash fee for directors was highest in the food products industry, at $75,000, with the aerospace & defense, petroleum products, and gambling industries not far behind.

And if you're planning to join a board, it pays to have a fancy title. The median total compensation for judges, at $344,953, was the highest among directors with titles. Knights get the next highest pay, at $164,636. And the lowest title premium? It goes to medical doctors. At $105,181, their median total compensation isn't far from the overall median.

McGregor is BusinessWeek's management editor.

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