Black & Decker boosts pay of outside directors

$10,000 raise will put $150,000 annual payout far above industry median

December 16, 2004|By William Patalon III | William Patalon III,SUN STAFF

Black & Decker Corp. is boosting the yearly compensation of its seven outside directors by $10,000 to a total payout of $150,000 each, the Towson maker of power tools disclosed yesterday in documents filed with the Securities and Exchange Commission.

The directors' compensation is considerably higher than the median received by non-employee directors of manufacturing companies, according to a survey by the Conference Board, a nonprofit business research group in New York.

Total median compensation rose to $72,750 this year from $69,620 last year, according to the Conference Board's annual survey of pay for independent directors. Total compensation includes all retainers, grants of stock or stock options, extra payouts for heading committees, and any other fees or payments, the Conference Board said in its October report.

Barbara Lucas, a spokeswoman for the company, said the increase, which takes effect in April, will be the first raise outside directors have received in nearly three years. Black & Decker used at least two outside consultants, and also conferred with other compensation experts, to make sure the increase was justified, she said.

"It is fair and reasonable compensation for a director of a company as large and complex as we are, and for one that operates in a global environment, as we do," Lucas said.

The company, which had $4.5 billion in sales last year, purchased Pentair Tools Group this year, an acquisition that it expected to boost annual revenue to more than $6 billion.

Black & Decker has also been a stellar performer for investors this year, partly because of their belief in the worth of the Pentair purchase, Lucas said. The company's shares are up nearly 74 percent this year, closing yesterday at $85.64.

As it reviewed the pay of its own directors, Black & Decker said it examined peer companies - typically defined as those in similar businesses, of similar sizes, and facing similar business challenges. The company did not identify the peer firms it used.

The company streamlined its director-compensation package several years ago, eliminating stock options in favor of a straight payout of cash and stock, according to Lucas. The annual payout is split 50-50 between stock and cash, although directors have the option of deferring some or all of their cash payment in the form of Black & Decker shares, the company said.

Black & Decker also requires directors to own at least $150,000 in company shares within three years of joining the board, the SEC filings state.

By paying directors partly in stock and requiring direct ownership of shares, corporations are attempting to more directly link the financial interests of board members with the long-term health of the company they were appointed to help guide.

Historically, board members were supposed to fulfill two roles. The first was to work with a company's top-echelon executives - the chief executive and chief financial officer, for instance - helping to set policies and serving as resources. The second was to act as watchdogs, making sure those top echelon officers and the corporation itself did not run afoul of laws, regulations and standards of ethical practice.

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