Area corporations lag nation in pay for non-employee board members

6/12/2002

The 128 non-employee directors of 18 publicly traded companies in the Toledo area got more than $4 million for their service last year.

At first, that sounds like a good-sized amount of money - an average of about $33,000 apiece - for attending six or seven board meetings and another half dozen committee meetings, interspersed with a few hours of homework for each meeting.

Plus, board members of several area companies get attractive stock options that could reward them handsomely if their firms perform well on Wall Street in coming years.

Yet although some area corporations pay their directors on a scale with the nation's largest firms, in general the region's companies lag national averages.

The Conference Board, a business research group based in New York, recently reported that manufacturing companies paid their directors an average of $51,000 last year (including stock benefits), down from $68,000 the previous year; service-sector firms paid board members $48,000, down from $57,000; and financial-services firms paid $40,250, down from $41,000. The group, which based its analysis on 660 companies, blamed decreases mostly on lower value of stock options because of sliding stock prices in the last couple of years.

Several area companies could claim to top the national averages - perhaps not for total reward but for selected portions.

For example, two months ago Owens-Illinois, Inc., boosted its annual director retainer fee to $55,000 from the $35,000 it had paid for years. In addition, O-I gives each director options on 5,000 shares annually - a perquisite of uncertain value. But, because those options extend out for up to 10 years, there is opportunity for future gains. In the last 52 weeks, O-I's stock has ranged from $3.62 to $19.19 a share, and its stock had been as high as $49 a share in recent years.

In a study of the largest firms in the country, Towers Perrin, a New York management-consulting firm, found the national median retainer was $30,000 and the median per-meeting fee was $3,600.

No local firms pay as much as $3,600 per meeting, but Findlay's Cooper Tire & Rubber Co. comes close, at $3,000 per day of duty (two of its five board meetings last year extended into a second day). Some of Cooper Tire's directors made well over $50,000 in fees last year, including $4,000 to $5,000 for heading a committee, and some directors were assigned to several committees, drawing extra per-meeting fees.

The tire maker gives its directors options on 2,000 shares a year, exercisable for up to 10 years, but it requires each director to own at least 5,000 shares, not including options. The idea is to provide a greater personal financial stake in the company, the company said in its latest proxy.

Among other area companies awarding generous stock options is La-Z-Boy, Inc., which gives each new director 30-day options on 4,500 shares of common stock- at a 75 percent discount from market price - and all directors get similar options on 600 shares annually. At recent stock prices, the initial grant could be a $90,000 windfall, and the annual grants would be worth $12,000 or so, in addition to the regular directors' fees that average about $26,000.

Some area corporations offer other incentives. For example, Dana Corp. pays its board members a $30,000 annual stipend, plus $2,500 for serving on a committee ($5,000 for committee chairmen), a fee of $1,000 for each board or committee meeting, and a special fee of $1,000 per half-day for “any special services performed at the request of the chairman of the board.”

Dana directors are encouraged to attend all committee meetings - even for committees they don't serve on. Each director receives annual options on 3,000 shares, exercisable up to 10 years.

Directors of Manor Care, Inc., get options on 9,000 shares a year, in addition to fees ranging from $32,500 to $47,000. Although those options might not allow directors to make a killing this year, Manor Care's stock has ranged from $6.43 to $34.50 a share in the last two years.

The largest bank holding company in the area, Bowling Green's Sky Financial Group, Inc., pays directors $24,000 to $32,250 a year. Some smaller holding companies have decent compensation too: Don Van Brackel, retired chairman of First Defiance Financial Corp., gets $63,000 a year as vice chairman, but to earn that he has to attend 52 executive committee meetings, 12 regular board meetings, 12 loan-committee meetings for a subsidiary, First Federal Bank of the Midwest, and a number of other committee gatherings.

The 18 Toledo-area public-company boards have a total of 173 directors, including those who are executives for their companies.

Of the 173, a total of 13, or about 8 percent, are women. Nationally, more than 12 percent of all board seats in the Fortune 500 and about 11 percent in the Fortune 1,000 are filled by women, according to Catalyst, a nonprofit research and advisory organization in New York. The only area firm with more than one female director is Owens Corning, with three.

The average age of area directors is just under 59. The youngest board is that of Libbey, Inc., at an average age of 52. The oldest is that of Ohio Art Co., of Bryan, at 64.

Only two directors are in their 30s: OC's chairman and chief financial officer, Michael Thaman, 37, and Michael Nicholson, chief operating officer of N-Viro International Corp., 35. Three are in their 80s, the oldest being John Weaver, 84, a retired banker who has been on La-Z-Boy's board for 31 years.

The area's outside directors come from all walks of life: 26 have a manufacturing background, 11 are lawyers, 11 came from the world of investments. Seven are educators, seven are developers or real-estate executives, and four each are bankers, accountants, contractors, and medical practitioners.