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The Board of Directors, Page 2

Fees, CEO Evaluation, and Ownership Structure


In exchange for providing their services, corporate directors are paid a yearly salary, additional compensation for each meeting they attend, stock options, and various other benefits. The total amount of directorship fees various from company to company. Tiffany & Company, for example, pays directors an annual retainer of $46,500, an additional annual retainer of $2,500 if the director is also a chairperson of a committee, a per-meeting-attended fee of $2,000 for meetings attended in person, a $500 fee for each meeting attended via telephone, stock options, and retirement benefits. When you consider that many executives sit on multiple boards, it's easy to understanding how their directorship fees can reach into the hundreds of thousands of dollars per year.

Ownership Structure and Its Impact on the Board of Directors

The particular ownership structure of a corporation has a huge impact on the effectiveness of the board of directors to govern. In a company where a large, single shareholder exists, that entity or individual investor can effectively control the corporation. If the director has a problem, he or she can appeal to the controlling shareholder. In a company where no controlling shareholder exists, the directors should act as if one did exist and attempt to protect this imaginary entity at all times (even if it means firing the CEO, making changes to the structure that are unpopular with management, or turning down acquisitions because they are too pricey). In a relatively few number of companies, the controlling shareholder also serves as the CEO and / or Chairman of the Board. In this case, a director is completely at the will of the owner and has no effective way to override his or her decisions.

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