Board of director compensation mixed bag at midstate companies
Nineteen of the midstate's public companies combined to pay out about 6 percent less to their boards of directors in 2014 than they did in 2013, bucking a nationwide trend that has seen director compensation rise, experts said.
The midstate companies paid almost $20.6 million in compensation for their directors in 2014, down from $21.88 million in 2013, according to data the Business Journal compiled from proxy reports.
“There is more being asked of these directors every year,” said Louis Taormina, a principal at New York City-based Frederic W. Cook & Co. Inc., a consulting agency that works with corporate boards and publishes a yearly report on director compensation. The 2014 edition, published in October, showed rising compensation rates in four of five major industries.
“That's one of the major trends we've seen in director pay,” he said. “There is a greater workload, more meetings, longer meetings, and it's resulted in a push for compensation to increase.”
2013 vs. 2014
Local companies experienced a significant anomaly in 2013 that inflated compensation statistics for that year.
Due to some large stock awards, Select Medical Holdings Corp. of Lower Allen Township paid out $2.44 million in compensation in 2013 — including $1.85 million to two directors.
In 2014, the company fell back closer to the norm and paid out about $1.27 million, including about $252,000 to the same two directors, William H. Frist and Thomas A. Scully.
If Select Medical had paid in 2014 what it paid in 2013, midstate director compensation overall would have been about even year-to-year, instead of falling.
Eleven of the 19 midstate companies saw increases for board pay in 2014.
“In the last five or six years, many companies were hesitant to review director compensation, even though they could have been working as hard or harder than they ever did before,” Taormina said. “As things have stabilized, there is more of a willingness to revisit director compensation.”
The Business Journal analyzed only public companies based in its primary coverage area — Cumberland, Dauphin, Lancaster, Lebanon and York counties. Companies that were not registered with the U.S. Securities and Exchange Commission or not required to publicly disclose compensation — such as Burnham Holdings Inc. — were not included. Integrity Bancshares Inc., which is now part of S&T Bancorp Inc., also never publicly disclosed compensation with the SEC.
The bank situation
Bank holding companies across the country saw director compensation rise, according to a May report from Brentwood, Tenn.,-based Bank Director, a research resource for the directors and officers of financial institutions.
Eight of the 19 midstate companies analyzed are bank holding companies. That includes Donegal Group Inc., which in addition to holding insurance subsidiaries, is also the parent company of Mount Joy-based Union Community Bank.
The national survey showed more than half of bank holding companies increased pay for their directors in 2013 and 2014, and 28 percent plan to increase it in 2015. However, another 28 percent have not increased director pay since 2010 or earlier.
The survey also reported that median hours per month for bank directors rose 33 percent in 2014 to 20 hours.
Al Dominick, president of Bank Director, said the last 15 years have changed the amount of responsibility placed on boards.
“Starting with the burst of the tech bubble in 2002, then the financial crisis, came this new corporate governance mandate that held directors much more responsible to the point where the (Federal Deposit Insurance Corp.) was suing directors for lack of oversight,” he said. “Companies and their boards really had to take the governance to heart.”
The top-compensated director in the midstate in 2014, Bon-Ton Corp.'s Michael L. Gleim, made about $467,000. That topped second-place earner James J. O'Connor of Armstrong World Industries Inc., who made about $413,000.
Unilife Corp. Director William Galle took home more than $406,000 as the third-highest earner.
Compensation figures are based on cash fees, stock options and other items such as change in pension value. The benefits and compensation differ at each company, as do responsibilities such as meeting time and board committee commitments.
Compensation figures include only nonemployee compensation, eliminating company executives who sit on a company's board.
Only one company featured a board member who refused compensation. Russell L. Carson, a director at Select Medical, did not accept compensation in 2014.
Carson notwithstanding, Select Medical placed three directors on the top 10 highest-compensated list, the only company with three on the list.