I want to be a director
With a great big boardroom seat.
I want to be a director
Cuz six figures are so sweet!
I want to be a director
Seize opportunities when they knock.
I want to be a director
With a million shares of stock!*
*With apologies to Mel Brooks, lyricist/composer of The Producers
I want to sit on somebodys board of directors. I want to get a fat salary, work only six times a year, and attend board meetings in glamorous places like Hawaii, New York, and Paris.
One director job would do, because the average compensation is in six figures. A Towers Perrin (New York) survey of non-employee corporate director compensation indicates that median annual compensation has risen to $118,337 in cash and stock in 2001, up from $100,807 in 2000. Not bad for a part-time job.
While annual or recurring stock-based grants are common, 29% of the companies surveyed also made one-time grants to outside directors, typically paid when a director is first elected to a board. The median one-time stock-based grant in this years survey was worth $151,587.
Everybody wants to be a director. And none of us seems to qualify.
Here at CONTROL magazine, we get dozens of announcements every month concerning people who are elected or appointed to the boards of directors of companies in our business. Every time I see one, I search in vain for a name of a control or instrument engineer, a maintenance person, or a union representative.
Alas, I rarely see anyone who actually might know what is going on inside the company at the plant floor level, or anyone who might know the difference between a control valve and a horse collar.
Typically, the new member of the board is a vice president of the company, often from human resources or accounting. So-called "outside" directors are usually more accounting people or the president of another company. In many cases, people who are named to one board are members of several other boards.
Boards of directors are in the news lately for doing outrageously stupid things (well, stupid to an engineer, anyway). The board of Enron, for example, approved a $6 billion buyout of a company after a whopping 45 minutes of due diligence research, according to the Wall Street Journal.
The board of directors at Hewlett-Packard is doling out severance packages of three times annual salary for departing execs. Say what? These people are getting fired, presumably for doing an awful job, yet the board is rewarding them? Michael Capellas, the former president of H-P, was given $14 million in severance when he resigned! Not when he was fired, but when he resigned to take another job!
And the boards of Invensys, Emerson, and Honeywell are coming under fire, too. We all know the miseries of Invensys, so there is no need to dwell there. As for Emerson and Honeywell, their boards have just been rated in the bottom 10 of 1,700 boards reviewed by Corporate Library, a governance-research firm in Portland, Maine.
Honeywell got there because its board gave former CEO Lawrence Bossidy an annual retirement of $4 million and use of corporate benefits, such as airplanes and cars, forever. It also gave current CEO David Cote a signing bonus of $59.5 million.
Emersons former CEO, C. F. Knight, has a similar deal, with annual compensation of $900,000, plus company airplane, car, clubs, and so on.
"What the worst boards all have in common is an inability to say no to the CEO," says Neil Minow, editor and founder of Corporate Library. "Compensation is the toughest question put to boards, and the one they most often fail on."
We are not privy to the inner workings of boards of directors, so we have no way of knowing what kinds of deals and pressures can be applied. What goes on at a board of directors meeting is as secret as what happens in the Inner Sanctum, the Club of Rome, or the Ku Klux Klan.
But no matter how it happens, directors of companies in our process industries have been making decisions as stupid as these severance and compensation payments for years.
Just recently, we endured the merger madness which led to the downfall of many companies in our industry. No matter that experts shouted to them that mergers dont work and most companies always lose money afterward, the boards of directors had dollar signs in their eyes. I suspect that most directors made a fortune from the mergers, although the companies suffered afterward.
Weve also witnessed some outrageous behavior toward employees by upper management, including cute little maneuvers by major companies like Monsanto and General Electric to avoid pension and insurance responsibilities.
Their latest trick is bringing in cheap immigrant labor with L-1 visas to replace American and Canadian engineers, techs, and operators.
I cant imagine any engineer permitting any of this to happen to his colleagues in the plant. We have much more honor than that. It doesnt seem to bother most directors, though.
The only solution to bring sanity back to companies in the process industries is to put engineers on the boards. Every board should have one engineer from the controls side, one from the manufacturing side, one from operations, and a person representing organized labor.
These four people, representing the plant floor and knowing how the company functions, would help to put an end to the stupidity and greed coming out of the clique of professional directors that are ruining our industry.
