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Director Pay Rise Marked by Shift in Stock Use
Pearl Meyer & Partners Study Also Finds Growing Focus on Compensation and Governance/Nominating Committees

New York, March 20, 2008—Median Board compensation among the Top 200 U.S. industrial and service companies totaled close to $206,000, with a continued shift in equity use away from stock options to full-value awards and a greater focus on committee pay, according to Pearl Meyer & Partners’ 2007 Director Compensation Report. The median overall "cost" of Board service at a Top 200 company—encompassing all fees paid to directors for Board and committee service—rose 11% to more than $2.0 million, according to the firm’s annual analysis of public filings.

“Over the past five years, companies have significantly increased Board pay to reflect the greater demands of the job, while also seeking to tailor the delivery of pay to members’ responsibilities and to good governance practices,” said Pearl Meyer & Partners Managing Director Jannice Koors.

Nearly two-thirds of Top 200 companies paid Board members in the range of $150,000 to $250,000. According to the Pearl Meyer & Partners study, pay levels tend to correlate with the proportion delivered in equity. The 10 highest-paid Boards received an average of 79% of compensation in equity, while at the 10 lowest paid companies stock accounted for 35% of pay.

Shift in Equity Use
The report found a 10% increase to more than $110,000 in the median total value of Board equity, fueled entirely by a rise in full-value awards, and a continuing shift in the type of equity being used. Full-value awards were provided by 89% of companies and rose 19% in value to $95,000. In contrast, the median value of Board option grants for the third straight year was $0 and averaged just over $31,000. The prevalence of option awards to Directors declined to fewer than 35% of the Top 200.

Securities Firms Remain Pay Leaders
For the fourth straight year, Securities firms provided the most generous Board compensation of the 25 industries studied at a median of $341,500, down 4% from a year earlier. The Healthcare sector ranked next at $279,177, reflecting more than 10% growth in both cash and equity values. The Petroleum/Crude-Oil Production & Pipelines sector climbed from eighth to third place compared to a year earlier with total pay of $276,569, boosted by a nearly 30% increase in equity values.

The most modest levels of Board pay were reported by companies in the Motor Vehicles & Parts, Energy/Utilities and Food/Beverage/Tobacco sectors, with median compensation of $157,800, $172,972 and $175,782, respectively.

Cash Retainers Up, Meeting Fees Decline
The median value of annual cash retainers for Board service, historically provided by nearly all the Top 200 companies, grew a relatively modest 4% to $60,000. However, a total of 18 companies provided a cash retainer of at least $100,000, up from just 10 such companies a year earlier. Five companies—compared to two the previous year—paid no cash retainer, but on average provided relatively higher value in equity at more than $260,000.

The study also found a steady decline in the use of Board meeting fees, which Koors attributed to a general move by companies to compensate Directors for their responsibilities rather than their activities. Only 51% of the Top 200 paid Board meeting fees in 2007, down significantly from more than 70% of companies five years ago.

Continued Changes in Committee Pay
More than three-quarters of Top 200 companies—slightly more than a year earlier—now differentiate pay levels for the Audit, Compensation and Corporate Governance/Nominating Committees. For the second straight year, 60% of Audit Committees provided compensation of $50,000 or more, while 35% of companies provided a similar level of pay for Compensation Committees and 24% for Governance/Nominating Committees.

“The narrowing pay gap among the three major Board committees reflects the sharply increased workload of Compensation and Governance/Nominating members, reminiscent of the earlier rise in Audit Committee pay in the wake of Sarbanes-Oxley,” said Koors.

As with compensation for Board service, committee meeting fees are becoming less prevalent in acknowledgement of the significant work required of Directors outside of meetings. The study found that the average Board meets nine times annually and maintains five standing committees.

Pearl Meyer & Partners also co-authors with the National Association of Corporate Directors the annual NACD/PM&P Director Compensation Report, which examines key trends in Director compensation at more than 1400 U.S. public companies. The report can be ordered at http://nacdonline.org/.

About Pearl Meyer & Partners
Since 1989, Pearl Meyer & Partners (www.pearlmeyer.com) has served as a trusted independent advisor to Boards and their senior management in the areas of compensation governance, strategy and program design. The firm provides comprehensive solutions to complex compensation challenges for companies ranging from the Fortune 500 to not-for-profits as well as emerging high-growth companies. These organizations rely on Pearl Meyer & Partners to develop programs that align rewards with long-term business goals to create value for all stakeholders: shareholders, executives, and employees. The firm maintains offices in New York, Atlanta, Boston, Charlotte, Chicago, Houston and Los Angeles.

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