AS UTILITIES FACE A MARKET WITH A PREMIUM brand identification, new board members increasingly have stronger backgrounds in marketing and financial services, according to a recent survey of 50 leading utilities by consulting firm Spencer Stuart.
"What is surprising and a little difficult to explain this year as compared to last year," says Jon Crystal, co-chair of Spencer Stuart's utility practice, "is that none of the new directors come from an airline or telecommunications background (em industries with prior experience in deregulation."
Nearly 30 percent of new outside board directors hailed from either consulting or financial services and investment sectors in 1996, compared with only 12 percent the previous year (see top figure). Twenty-two percent of new members came from energy backgrounds, the largest in the history of the survey. About 18 percent came from not-for-profit backgrounds, compared with 27 percent from that sector the previous year. Twenty-two new outside directors joined utility companies in 1996.
Yet, while these outside directors continue to receive steady payment for their commitments, utility board compensation continues to lag other industries. In 1996, the average compensation paid to outside directors at the 100 leading non-utility corporations tracked by the report was $58,207 annually (see bottom figure); that compares with $38,727 paid to directors on utility boards. Topping the list in total compensations was The Southern Company at $59,350; Illinova came in last at $18,500. Directors at S&P 500 companies earned about $44,189.
"If recruiting top-level directors is critical to the success of the company, we have to question whether offering¼ below-market compensation is the best way to achieve this," says Crystal.
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