Due to some very unfortunate events in the area of corporate governance board directors have been under increased pressure to perform. The pressure has come through a variety of sources including: Sarbanes-Oxley requirements, SEC rule changes, revised stock exchange listing standards, and shareholder concerns. With the increased role and responsibility of the board director I examined how board directors within the chain restaurant industry are paid. The information below illustrates the following:

  • Chain restaurant industry board director pay by market capitalization
  • Chain restaurant industry board director pay compared to other segments of the hospitality industry; more specifically; lodging and gaming

Findings from the report are culled from HVS' 2005 Hospitality Board Director Compensation Report©. The peer group comprises one hundred thirty-six publicly traded hospitality companies (60 restaurant, 40 lodging and 36 gaming organizations). All compensation and financial data was obtained through company proxy and/or 10K reports.

Chain restaurant industry board director pay by market capitalization
A review of total compensation1 for chain restaurant board directors indicated a strong correlation between the amount of compensation received and the size of the company. The median compensation for organizations whose market capitalization is greater than $1 billion in sales was $230,904, sixty-six percent (66%) greater than board directors serving companies in the $300 Million - $1 Billion category, and more than seven times that of the $29,205 received by directors of companies with a market cap of less than $300,000,000.2

Restaurant Market Compensation by Market Cap

Chain restaurant industry board director pay compared to other segments of the hospitality industry
Using the same data breaks as above, Less Than $300,000,000, $300,000,000 - 1 Billion, and Greater Than $1 Billion, I compared how chain restaurant board director total cash compensation compared to their lodging brethren (Lodging and Gaming). Our findings illustrate the following:

Greater Than $1 Billion $300,000,000 - $1 Billion Less Than $300,000,000
Restaurant $230,904 Restaurant $138,820 Restaurant $29,205
Lodging $105,572 Lodging $56,351 Lodging $34,750
Gaming $317,887 Gaming $118,835 Gaming $40,873

Outlook
Closer governmental scrutiny (i.e. Sarbanes-Oxley and SEC) combined with increased shareholder expectation will continue to force the issue of improved corporate governance. With this expectation board director compensation within the chain restaurant industry will continue to rise as "best practice" companies will understand the need to pay competitive rates to attract and retain the best and brightest board directors.

We have just completed our 2005 Hospitality Board Director Compensation Report©. Open the link below to view more information on this report:

  • 1 Total Compensation = Cash Retainer + Initial Stock Retainer + Meeting Fees + Annual Stock Award
  • 2 Market cap was obtained from smartmoney.com on August 1, 2005.

David Mansbach is Managing Director of HVS, a consulting firm specializing in senior level executive search, corporate governance counseling, and compensation consulting for the restaurant/retail industry. He can be reached via phone at (516) 248-8828, ext. 257. More...

HVS International is a hospitality services firm providing industry skill and knowledge worldwide. The organization and its specialists possess a wide range of expertise and offer market feasibility studies, valuations, strategic analyses, development planning, and litigation support. Additionally, HVS International supplies unique knowledge in the areas of executive search, investment banking, environmental sustainability, timeshare consulting, food and beverage operations, interior design, gaming, technology strategies, organizational assessments, operational management, strategy development, convention facilities consulting, marketing communications, property tax appeals and investment consulting. Since 1980, HVS International has provided hospitality services to more than 10,000 hotels throughout the world. Principals and associates of the firm have authored textbooks and thousands of articles regarding all aspects of the hospitality industry. Click here for more...

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