September 11, 2015

Director Compensation on the Rise

Steven Hall & Partners recently released its 2015 Director Compensation Study, which indicates that, among the top 200 companies studied, 2014 total compensation for the average director increased 3.1% as compared to 2013 compensation, and 19.2% over 2009 amounts. Over the last five years, the compensation committee chair position has had the largest increase in total compensation, up 19.6%. The study also indicates that while equity awards continue to increase as a percent of total compensation, stock options continue to decline in prevalence. Also noted in the study is the prevalence of share ownership guidelines, which are generally expressed as a multiple of the annual board cash retainer.

PCAOB’s Next Chair: Rumors for Next Candidate?

Here’s an WSJ article:

The Securities and Exchange Commission is looking at candidates to lead the government’s audit regulator other than current Chairman James Doty, even though Mr. Doty has indicated he wants to be reappointed to another term. The SEC is “identifying interested and qualified candidates” to chair the Public Company Accounting Oversight Board, SEC Chairman Mary Jo White told reporters Wednesday at a meeting of a PCAOB investor advisory group. That raises the possibility that the SEC, which oversees the auditing panel and appoints its members, could select someone other than Mr. Doty to serve as chairman after his current term expires in October.

A change at the top could signify a change in priorities for the PCAOB, the government watchdog responsible for making sure auditors conduct rigorous, impartial audits of publicly held companies. As chairman, Mr. Doty has emphasized efforts to require auditors to disclose more information to investors, but he has faced pushback from the accounting industry and, sometimes, questioning from SEC officials about the audit panel’s approach. Ms. White said the decision will be made by the five-member commission, but declined to discuss timing.

Mr. Doty, who has chaired the PCAOB since 2011, told reporters at the same meeting that he would like to remain as PCAOB chairman if the SEC wishes to keep him in the post. “I’ve made it clear that if the SEC thinks I should be there, I want to be there,” he said, adding there is ”more work we need to do.” A PCAOB spokeswoman declined further comment. During his tenure, Mr. Doty, 72 years old, has focused on initiatives such as requiring audit firms to name the partner in charge of each client’s audit and expanding the audit report to have auditors tell investors more about what they discover. He contends those disclosures will improve audit quality and make auditors more accountable.

But some of Mr. Doty’s disclosure efforts have been modified or significantly delayed. When Mr. Doty broached the idea of requiring audit firms to periodically change their auditors—a move that regulators in Europe have since enacted—pushback from the industry and Congress was fierce enough for the idea to be shelved.
Last December and again in February, SEC officials also criticized the PCAOB over the audit panel’s priorities, suggesting the PCAOB was too focused on its disclosure efforts and not enough on enacting rules to govern the nuts and bolts of conducting audits. Since then, however, the two regulators seem to have smoothed things over. Mr. Doty has said he is trying to make the PCAOB’s rule-making process more efficient, and SEC Chief Accountant James Schnurr said in a June speech he is “pleased” with the PCAOB’s response, though the board should “stay focused.”

Despite the fact that Mr. Doty may be replaced in coming months, Ms. White thanked Mr. Doty “for his leadership,” and Mr. Doty said it “has meant a great deal to me” to have known Ms. White and have her support. It is possible the SEC may allow Mr. Doty to stay on as PCAOB chairman beyond the end of his term until it decides whether to reappoint him or name a different chairman. There is precedent for such a move—before Mr. Doty became chairman, Daniel Goezler, the previous acting chairman, and Charles Niemeier, a PCAOB member, stayed in their posts long after their terms officially expired. The SEC is about to lose two of its five commissioners, but Ms. White said she doesn’t anticipate a “hiatus” in the SEC’s work as a result, including the consideration of Mr. Doty’s reappointment.

– Dave Lynn