A number of companies have reacted to shareholder and public criticism by reducing director pay. Some directors have made efforts to preemptively dock their own pay.
However, George Davis, partner at Egon Zehnder International, writes in The Wall Street Journal, that boards should not feel obligated to reduce their pay. The current economy has launched unparalleled problems for directors and companies must be able to recruit and retain qualified directors.
Davis argues that boards do not serve on boards for the pay. In fact, prominent directors have generally already achieved a high degree of success in their careers and have a lot more to lose. Reputations that took decades to build can be tarnished easily in a volatile economy.
He notes that much of the criticism geared toward directors is a result of a lack of knowledge of the type of personal investment of time and energy directors are required to utilize when serving on the board of a leading company.
Ultimately, if the best directors are discouraged from serving, it will have a domino damaging affect. While shareholders should make themselves heard, argues Davis, shareholders should focus on best corporate governance practices as opposed to only director compensation. He adds that directors should be applauded and compensated fairly for the time and effort invested.