[More on Monsanto]
Monsanto Co.'s non-executive directors are already the highest paid in St. Louis. Now they'll receive even bigger paychecks to guide the agricultural biotechnology company and protect shareholder interests.
Monsanto boosted the annual base retainer it pays to non-executive members of its board by $20,000 to $150,000, according to a report filed April 25 with the Securities and Exchange Commission (SEC).
The increase follows a similar $20,000 raise authorized by the board a year and a half ago. Payments consist of a combination of cash and stock. Now Monsanto directors receive twice as much or more in base pay as directors at all but one other public company headquartered in St. Louis.
Emerson pays its directors $120,000 a year for their time and services, second only to Monsanto. But the third-highest base retainer among the region's largest publicly traded companies — $75,000 a year paid to directors at Arch Coal Inc. — is half of what Monsanto directors receive. Directors at Anheuser-Busch Cos. Inc., the region's largest public company in terms of revenue, receive $60,000 in annual base pay. Emerson is St. Louis' second-largest public company, while Arch Coal ranks 19th. Monsanto ranks eighth based on revenue.
"The compensation for members of our board of directors reflects the market value of those positions," said Ben Kampelman, a Monsanto spokesman. The amount is based on benchmark compensation surveys of similarly sized companies within the specialty chemicals and biotech industries. "The pay must be able to attract and retain the high quality of candidates for a director's position among these comparable companies."
Monsanto's 10-person board includes John Bachmann, senior partner and former managing partner at Edward Jones; William Parfet, chairman and chief executive of MPI Research Inc.; George Poste, chief executive of Health Technology Networks and director of the Arizona Biodesign Institute; Hugh Grant, Monsanto's chairman, president and chief executive; C. Steven McMillan, chairman of Sara Lee Corp.; Robert Stevens, president and chief executive of Lockheed Martin Corp.; Frank AtLee III, retired president of American Cyanamid Co.; Gwendolyn King, president of Podium Prose; and Sharon Long, professor of biological sciences and dean of Stanford University's School of Humanities and Sciences. One seat is vacant. As a company executive, Grant is the only director not paid for his services on the board.
"The main cause of increased (directors') fees is that more time costs more money," said Eric Marquardt, a senior consultant at Towers Perrin who specializes in executive compensation. "Most of these individuals are senior executives at other companies or are in other high positions, and they are being compensated for their time taken away from other activities."
The Monsanto board met seven times last year, compared to four times during the nine-month transition period in 2003 before the company changed the start date of its fiscal year. The board met seven times in 2002, five times in 2001 and four times in 2000, according to proxy statements filed with the SEC.
In addition to full board meetings, most of Monsanto's seven board committees met an additional five to 11 times each last year.
The company's committee chairs receive additional retainers for their extra work. The chairs of Monsanto's audit and finance, people and compensation, and nominating and corporate governance committees each earn an additional $25,000 a year. Chairs of the science and technology committee and the public policy and corporate responsibility committee receive $15,000 each. Chairs of the remaining two committees, the executive and restricted stock grant committees, are paid an extra $10,000 a year, as are all non-chair members of the audit and finance committee.
Audit committees at the top 200 corporations in the country met twice as often last year as they did five years earlier, according to a national study of director compensation conducted by Pearl Meyer & Partners, a New York-based executive compensation consulting firm. The study found compensation committees are holding 50 percent more meetings.
Directors must not only attend more and longer meetings, but they require more time to prepare and to review materials, said Jannice Koors, a managing director at Pearl Meyer & Partners.
Mandates from legislation such as the Sarbanes-Oxley Act of 2002 and changes in SEC and stock exchange rules have raised director responsibility and accountability to new levels.
"There is no question that the amount of time and exposure you have (as a board member) has increased dramatically, maybe on the order of doubling, since Sarbanes-Oxley," said Stuart Greenbaum, dean of the Olin School of Business at Washington University.
Directors face increased personal, professional, reputational and financial liability. In March, 11 former WorldCom Inc. board members agreed to pay $20.25 million of their own money as part of a $55.25 million settlement with former investors who lost billions of dollars when the company collapsed in 2002. In January, 10 former Enron Corp. board members agreed to pay $13 million of their own money toward a $168 million settlement of an investor lawsuit stemming from the company's collapse in 2001.
"Fallout from a lot of the scandals we've seen over the last 24 to 36 months shows there is clearly not much tolerance for directors to use the 'I didn't know' excuse," Koors said. "Now the preparation time and the volume of material to get their hands around has expanded enormously."
The heightened sense of risk in the role, along with the added workload and time requirements, is limiting the number of boards many directors are willing to sit on, leaving qualified directors with appropriate experience and knowledge harder to come by.
"Highly sought-after directors are scarce, and that demands a premium," Koors said.
These factors are driving up base retainer rates at public companies across the country and across St. Louis. Many boards have approved double-digit director compensation increases over the past few years.
Express Scripts Inc., for example, increased director base pay 20 percent this year from $25,000 to $30,000. Sigma-Aldrich Corp.'s board gave itself a 37.5 percent raise, going from $20,000 in 2004 to $27,500 today. Spartech Corp.'s directors now earn $40,000 annually, 48 percent more than the $27,000 they received last year. The biggest percent changes were registered by Centene Corp., which boosted director pay 140 percent from $10,000 a year to $24,000 annually, and MEMC Electronic Materials Inc., which increased pay 140 percent from $5,000 to $12,000 a year.
Marquardt and Koors said they expect such raises will continue for a while as the going rates for directors settle out among various companies. But double-digit year-over-year increases won't be sustainable in the long term, they said.
As for the discrepancy between director compensation at Monsanto versus larger companies such as Anheuser-Busch, Greenbaum pointed out that payments can be based on past issues at a company. When the modern Monsanto was spun off by Pharmacia Corp. in 2000, Monsanto faced several financial and organizational challenges. During that first year, non-executive directors were paid based retainers worth $110,000 to help the shaky company get on its feet. The company is much more stable now, with a stronger balance sheet and higher stock price, but compensation levels rarely go down, Greenbaum said.
Although overall increases in director compensation have been necessary to attract and retain qualified board members, the larger paychecks could present their own set of problems, Greenbaum said. "As compensation goes up, you have to question the independence issue."
source: http://stlouis.bizjournals.com/stlouis/stories/2005/05/09/story1.html 9may2005
|
To
send us your comments, questions, and suggestions click
here |