Pay for corporate directors grew at a slower rate last year than in 2004 as boardrooms absorbed the new governance rules changes brought about by accounting scandals, according to a new U.S study.
Research by Mercer Human Resource Consulting found that corporate directors received an average 6.1 per cent increase in compensation in 2005, versus a 17.8 per cent rise in 2004.
That compared with a five per cent boost for chief executives and an average 5.5 per cent rise for workers at private companies across the U.S last year.
"Back in 2002, when Sarbanes-Oxley came into being, there was a tremendous amount of pressure to do a lot more work, especially the audit committees," said Mercer senior compensation consultant Peter Oppermann.
"They were actually putting time in on corporate governance issues. That's really what drove the major increases," he added.
Since then, pay growth had slowed, falling sharply as duties stabilised.
"What directors have been doing has changed dramatically. I think that change has slowed quite a bit," pointed out Oppermann.
As director pay raises grew less sharply, the median base salary for chief executives remained flat at $975,000, according to a Mercer study published in April.
The rise in total compensation came from bonuses, which reflected the greater effort to align compensation with profitability.
In the same period, pay rates for workers in the U.S. went up by less than directors but more than chief executives, according to quarterly census wage data from the Bureau of Labor Statistics.
The Mercer study of director pay was based on an analysis of the proxy statements of 350 large publicly traded companies in the U.S.
Median director pay in 2005 was $164,637, and Mercer found that fewer directors received stock options as part of their compensation.
Instead of options, 63 per cent received stock grants or restricted stock in 2005, while 58 per cent got stock grants in 2004.
The trend, Oppermann said, would continue and was consistent with increasingly common executive compensation practices.
"Ownership, or having a stake in a company's shareholder value, is more appropriate than a leveraged award for increasing stock price," he said.
The study also showed that director compensation was higher at bigger companies and that pay differed greatly according to the industry.
At companies with median annual revenue of $1.8 billion, median pay for directors was $128,339 in 2005, while companies with revenue of $20.2 billion paid directors $187,348.
The computer and office equipment category paid directors the highest salaries, with median total pay of $261,704.
The lowest-paying industry was forest and paper products, which paid a median of $124,000.