Sarbox Results in Higher Director Pay

Lora Bentley

Since the Sarbanes-Oxley Act became law five years ago, the responsibilities (and the liabilities) associated with serving as a director for a publicly traded company have increased. Not surprisingly, compensation for the job has increased as well.


The Chicago Tribune reports:

Compensation experts at Equilar Inc. report the median pay for non-employee directors at Fortune 500 companies rose 10 percent last year, to $165,000. That's on top of double-digit pay increases at major U.S. companies each year since the law took effect, according to studies by Institutional Shareholder Services.

Unfortunately, however, the same law that bestowed the boon upon them can also take it away, in a sense. Sarbanes-Oxley-required filings revealed a widespread practice of compensation via stock options which, when granted, were backdated to afford the recipients more benefit.


As a result, the Securities and Exchange Commission approved new rules requiring more transparency in executive compensation practices -- particularly stock option practices -- so that, in theory, shareholders can take action if they feel their companies' directors are being overpaid.

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