Board of Director Compensation & Program Design

A distinct compensation need is that of defining appropriate compensation levels and incentive programs for the independent members of a Board of Directors in public or private real estate organizations. Board of Director members have varying roles, depending on the circumstances. In public companies, outside members dominate, have a significant role in monitoring and oversight of all aspects of the company and all have roles as members (and likely Chairmanships) on key Committees (Audit, Governance/Nominating, Compensation, Investment, etc.). In private companies, outside Board members may act similarly as in public companies or may have a lesser role as other owners (or family) dominate the membership (and voting) on the Board. A public company’s outside Directors are subject to considerably greater scrutiny and regulations for disclosure and decision rationale. Regardless of the situation, designing appropriate Board of Director compensation requires a full understanding of the dynamics of control and governance as well as the duties, responsibilities and risks associated with Board membership.

CEL is frequently asked to define and make recommendations on the compensation of outside Board members on behalf of shareholders and investors.

Corporate operating issues and changes generate needs:
  • Annual or periodic review of Board of Director compensation.
  • New Board composition or merger/acquisition.
  • Change of Control or transition from the retirement or death of a Founder.
  • Expansion of the roles of outside Board members.
  • New Chairman or new Executive Chairman.
  • Separation of Chairman and Chief Executive Officer position(s).
  • A strategic or financial issue which is the cause of new or re-structured Board responsibilities.
CEL offers independent advice, fulfilled by:
  • A substantial database of public and private Director compensation.
  • Details on compensation for annual retainer, meeting attendance, Chairman role, Committee Chairmanship, Committee membership, and other aspects of Director compensation.
  • Understanding of the equity and cash-based compensation issues and best practices.
  • Advantages and disadvantages of alternative incentive structures for Directors.
  • Knowledge of the clear distinctions between annual vs. long-term plan elements.
CEL adds value from insight and experience for decisions:
  • Review and analysis of current Board compensation.
  • Ability to understand issues and dynamics of Board governance from interviews.
  • Capability to establish an appropriate peer group for Board compensation review.
  • Experience in setting an appropriate benchmark vs. market compensation.
  • Understanding of Committee roles and responsibilities.
  • Experience in making recommendations for Board of Directors’ initial (at election) and annual compensation.