ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, April 7, 1996 TAG: 9604050139
SECTION: BUSINESS PAGE: 1 EDITION: METRO
SOURCE: ELLIOTT SMITH STAFF WRITER
The move by some major U.S. corporations to change how they pay outside board members is drawing attention from several Western Virginia corporate directors, but so far few changes among their companies.
High-dollar retainers and meeting fees have come under fire recently by some stockholder groups, claiming directors ought to be paid in stock rather than cash. That, proponents claim, would make outside directors more independent of top management and give them a greater stake in the company's performance.
"I think it's a good idea," said William Lavery, a retired president of Virginia Tech and a director of both Shenandoah Life Insurance Co. of Roanoke and Columbia Gas System Inc. of Wilmington, Del. "It keeps the members of the board on the same page as that of the stockholders and it increases your potential," Lavery said.
Columbia Gas, which recently announced plans to move its headquarters this summer to Reston, Va., is initiating a stock option as part of the company's retirement plan for board members, replacing a monetary payment, Lavery said. Currently, the company pays directors $25,000 a year as a retainer plus $1,000 for every meeting they attend.
Shenandoah Life declined to release the compensation figures for its directors, saying it is a private company without an obligation to reveal what it pays directors. Shenandoah is a mutual life insurance company, meaning it is owned by its policyholders.
"Moving toward stocks is a way to have directors have more stake in the company, which I think is reasonable," said Jane Margaret O'Brien, the Hollins College president who sits on Norfolk Southern Corp.'s board. The Norfolk-based transportation company pays its board members a $32,000 annual retainer and $1,800 per meeting. Last year, the company had seven board meetings, and its four committees averaged four meetings. The company said it has no plans to change its board compensation policy.
O'Brien also sits on the board of Landmark Communications Inc., the Norfolk-based parent of The Roanoke Times. Because it is a privately held company, Landmark declined to say how it compensates its directors.
Roanoke Electric Steel Corp. Vice President Joe Crawford said that a shift from cash to stock wouldn't change the role of directors at his company.
"Our directors have a pretty substantial holding in stocks already, so I'm not sure that would make a difference," he said. "What some companies want to do with stock is increase ownership, but we already have good ownership." The company has no plans to change its compensation of board members, which is $750 a month plus $750 for each meeting a director attends. With one meeting per month, perfect attendance could equal $18,000.
Richard Sorensen, dean of Virginia Tech's Pamplin College of Business, said some corporate directors think the public might not understand the amount of work that goes into being a board member. He is a board member of Brad Ragan Inc., a tire manufacturer and marketer based in Charlotte, N.C.
"It's not just being at a meeting and reading things," he said. "There's quite a bit of meeting and thought that goes into it and you don't get paid for that, but a lot of members are fearful that people will think it's excessive compensation."
At Brad Ragan, board members receive $2,500 for each meeting they attend in person or $500 for participating by phone. According to Sorensen, the board meets about four times a year.
At Tultex Corp., the fleece maker located in Martinsville, board members receive $2,500 each fiscal quarter plus $1,000 for attending a board meeting or a committee meeting that's not held on the same day. If a committee meets on the same day as the full board, the company pays $500 to attend the committee meeting. According to Tultex's 1995 proxy statement, the board held four meetings and committees averaged 2.3 meetings a year. A company spokeswoman said there are no current plans to change the compensation plan.
Surprisingly, some board members claimed no knowledge of their compensation as corporate directors, "I'm embarrassed to say, but it's a process that has changed, and I really don't know," O'Brien said. Thomas Robertson, president and chief executive of Carilion Health System of Roanoke and also a member at Shenandoah Life and Roanoke Electric Steel boards said he "has no idea" about his pay as a director.
Others contacted - Lavery and Roanoke Electric Steel director Charles Lunsford II of Roanoke - said they were reluctant to talk about how much they make from participating on a board.
LENGTH: Medium: 80 linesby CNB