Director pay: how high can it go?
We’re deep in the heart of proxy season, at least for the next few weeks (the deadline for companies on a calendar year is April 30), which means that each new day brings a crop of new and exciting disclosures about those Demi-gods who either run public companies or are lucky enough to be invited to sit on to the board of directors.
As filings go, proxies tend to be the most fun to read, if for no other reason than they contain so many juicy details about pay, perks, and shareholder angst. But one section that we always like to pay particular attention to is the one on director pay. While there’s no right or wrong answer for how much a director should make (factors like the size of the company should clearly come into play), we tend to pay closer attention to directors who make more than $400,000 a year for what can charitably be called a part-time job.
We came across a great example of that in the proxy that footnoted frequent flyer Steve Madden Ltd. (SHOO) filed yesterday. There, under director pay was the disclosure that John L. Madden, who works as a consultant and happens to be Creative and Design Chief Steve Madden’s brother, was paid $1.6 million as a director last year, a 33% raise over what he made in 2010. Granted, most of that was for consulting fees paid to a separate company controlled by John Madden (there was also $63,106 spent on an apartment because apparently paying for housing was out of the question). But still, that’s $1.6 million for a part-time job, since as the same filing notes:
The Board of Directors held four regularly scheduled meetings and two special meetings during the 2011 Fiscal Year and acted by unanimous written consent on one occasion during the 2011 Fiscal Year. In 2011, each director attended at least 75% of the aggregate number of Board meetings, and each director attended at least 75% of the aggregate number of meetings held by all committees on which he then served.
While we were pretty sure John Madden was the highest paid director we’ve seen so far this season, we decided to pose the question to our 10,000 plus followers on Twitter to see what they thought. We got a few good suggestions, including one from an analyst who pointed us toward this proxy filed by Vertex Pharmaceuticals (VRTX). While none of Vertex’s eight directors made as much as Madden last year, there were two that came close, making $1.3 million each. The other six all made over $500,000 last year. Granted, most of that pay came from options, as opposed to consulting fees and other goodies. But it’s still a lot of money for a part-time gig, though to be fair, Vertex directors met pretty frequently last year. (Indeed, the company provides a helpful chart on pg. 18 of the proxy that shows how many times both the board and the various committees met).
So right now, Madden remains in first place in what we’ll call the footnoted Reverse Limbo contest. But there’s still a little over two weeks left for someone else to unseat him!
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