Board of Directors Compensation

Board members may or may not be executives of the Company. When it comes to External or Independent Directors, that is, when they do not exercise any other role than that of acting as a Director for the Company, it is critical to carefully consider how to compensate them for their time and experience in the service of the Company.

Directors' compensation has had an upward trend in recent years. This is happening because:

• Boards of Directors have become more important than in the past: they have acquired a key role in improving results, both in the short and long term, by requiring definitions and clarifications on strategy and business management. They make the company prioritize initiatives and resources to achieve its objectives.
• The responsibilities and time required to participate in the Board of Directors have increased significantly. The Board requires accountability to the company's management, and provides a "grounding wire" particularly useful in those companies where the CEO does not have the contrast of his subordinates.
• The risks of participating in a Board of Directors have also increased (D&O insurance for Directors' errors and omissions offers only partial, and increasingly reduced, protection). The risk involved ranges from criminal to loss of professional prestige.
• Most importantly, it is not easy to recruit and retain prestigious, experienced and committed Directors.

The most in-demand Directors contribute with their network of contacts, providing access to key places and people, and generating credibility for the business. These Directors have an excellent knowledge of the industry, understanding in depth how value is created in it. And at the same time they must have skills such as good communication skills, and to maintain professionalism when under pressure. They must also possess adequate financial expertise, vision and aptitude for strategic planning, and a track record of excellence. As you can imagine, attracting and retaining these profiles may not be an easy task.

CompStrategy can help with:

• Determination of the market-based compensation considering different roles adopted by the Director: Board Member, Committee Member (Audit, Compensation, Risk, Governance, others), Committee Chairman, Board Chairman
• Determination of payment scheme (Annual Fees, Retainer Fees, Meeting Fees, Teleconference Fees)
• Statistics and market information arising from the role of Director such as number of meetings per year, hours dedicated to the function, gender, length of mandate, retirement age, committees in operation, compensation, others
• Setting and Advice for the Remuneration Committee