Commentary by David F. Larcker, James Irvin Miller Professor of Accounting & Director, Stanford GSB Corporate Governance Research Program; and Brian Tayan, Stanford GSB Case Writer, MBA ’03.
(Footnoted.org originally reported on this disclosure)
On January 22, 2010, BWAY Holding Company released the compensation paid to nonexecutive chairman Jean-Pierre Ergas for fiscal year 2009. The amount: $1.45 million. The pay package included $660,000 in salary, $438,000 in deferred compensation, and $305,000 in “other compensation”—primarily consulting fees but a portion ($27,000) for travel benefits for Mr. Ergas’ wife. By comparison, nonexecutive directors of the largest 100 companies listed on the New York Stock Exchange received approximately $200,000 in total compensation.
Ergas no doubt brings expertise to the board. He had served as chairman and CEO of the company from 2000 to 2007. For those services he was paid amply, including $6.3 million in his last year as CEO. However, given the company’s size ($903 million in revenue and $23.5 million net income for 2009), shareholders may wonder what they are paying such a full price for a chairman. They may also wonder why they have to pay “consulting fees” to a director who is also receiving a salary for his services.