Sitting on a compensation committee is an honor and a responsibility, one that is much bigger since the Securities and Exchange Commission implemented new rules designed to protect the compensation process. The compensation committee is responsible for setting and monitoring the pay of a company's executives and ensuring that the compensation is fair and in compliance with these new rules.
Just how much do members of the compensation committee earn for their service? Equilar, Inc. (www.equilar.com), an executive compensation research firm located in Redwood Shores, California, recently released a survey addressing that question. The 2007 Compensation Committee Trends Report provides a glimpse into payment practices at 975 publicly traded Standard & Poor's 1500 companies to their compensation committee members.
The report found that compensation committee members at the surveyed companies had been committee members for an average of roughly 7 years and met on average 5 times during 2006. The committee chairperson received an average retainer of $8,000, a 6.7% increase over the 2005 retainer of $7,500. Most companies compensated the committee chairperson with meeting fees totaling an average of $7,500 for the year. The overall pay for compensation committee chairs averaged $12,500 in total.
Retainer fees paid to compensation committee members who do not chair the committee averaged $5,000 in 2006, unchanged from 2005. However, most of the surveyed companies compensated the committee members using only meeting fees, rather than a retainer. The average committee-level pay during 2006 was $7,500, which is a 14.5% increase over the prior year.