ESOP Company Boards Moving Toward Independent Directors

One of the more notable trends in ESOPs over the last several years has been the move to more outside, independent directors. According to a 2009 NCEO governance survey, the average board of directors has 5.6 members, of whom 61% are insiders, 27% are independent directors, and 12% are "affiliated directors." Twenty-six percent of boards are composed solely of insiders. Majority ESOP-owned companies are more likely to have independent directors. Companies in the 2009 survey were more likely to have independent directors than companies in the 2005 survey.

The median annual compensation for nonemployee directors is $10,000, excluding the 26% of companies that have uncompensated nonemployee directors. The vast majority of directors who are employees are not compensated specifically for their board service. Twenty-nine percent of companies provide a full pass-through of voting rights, and 17% have participants vote for some or all directors.

Survey results are available to NCEO members by contacting Loren Rodgers at [email protected]. The NCEO publishes a book on issues for board members, The ESOP Company Board Handbook. We can also direct members to other ESOP companies in their area who might have people interested in serving on boards and have a limited number of names of ESOP experts who also have an interest. Contact me at [email protected] for details.