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How Much Per Hour to Eat Cheese?

June 10, 2014

Most companies have a board of directors, who are in place to guide the company strategy.  While some boards are very active — I know one chairman who spends two full days a week in the offices mentoring the CEO and other key players — many meet on an infrequent basis for a day or two and rarely show to the office.

The Register has a quick article today on board compensation, and how some people are unhappy about it.  Facebook is the subject:

Facebook is currently following its 2012 equity incentive plan, which caps total awards at 25 million shares and individual awards at 2.5 million, which in theory could let the board award directors up to $157m in stock each, based on Monday’s closing price of $62.88.

Although the board hasn’t paid out that kind of package, Espinosa contends that last year’s average take-home pay of $461,000 to non-employee directors was too much. He said the sum was 43 per cent higher than the typical payout at firms like Amazon and the Walt Disney Company, where revenue was twice as high and profits were triple those of the social network.

And who sets the compensation?  Well… the board.  This type of self-governance is probably right to question on occasion, just to make sure the people who are supposed to be the responsible team in charge is actually, well, the responsible team in charge.

This is a tough one for me to comment.  I’m fond of saying that I don’t begrudge anyone’s ability to get paid, though I do begrudge the people who pay it.  Get a sweetheart pension for your work?  Well, fine, you’re the one working.  The union and bosses that negotiated it?  Well, they need to be held responsible.  In this case, though, the people voting on the payment are the people who are getting it.  That can always raise an eyebrow or two, especially if the ceiling is a high one.

I don’t mean to denigrate a company board, either.  Like I said, some members take their jobs very seriously, and actually spend a fair amount of time driving the company to do the right things.  The board is responsible for directing the company to success, and the executive team at the company builds the strategy and action plans to do it.  It’s only when the board is unfairly compensated for a weekend meeting that it generates some ire.

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