"When times are not good, like now, boards start paying more attention to the performance of senior management, espcially in terms of compensation."  —Jeremy Banoff

Just how limitless is the board pool?

Companies still want diversification, whether it's among men and women, ethnicities, or race. But even that aside, it's really good to have everyone sharing different ideas from different places. What's working over here, what's working over there? When you think about recruiting and compensating executives, companies are not just competing within their industries. There are virtually no boundaries. That said, it certainly helps to have industry-specific experience on your board, too.

Have you seen anyone go out on a limb in terms of board members?

Not too far out, but when I was working with a real-estate company, the CEO of NutriSystem was on the board. You might ask, “What was he doing there?” But he was voted CEO of the year by a business magazine. That was attractive. Nowadays companies want that diversification and people who are really successful. That's one of the main criteria.

What kinds of advice are companies looking for today about picking board members?

Boards are interested in making sure they are staying within market standards. The difficulty is when you benchmark a board, you stick within an industry or you base it on the size of the company. You don't find performance as a part of a board's compensation package, though you find members get a lot of their compensation in stock and that's driven off of performance. But at the end of day, the directors are there to act as fiduciaries for shareholders.

Still, hasn't board compensation actually been swelling in recent years?

Compensation for boards has gone up steadily in the double-digit range since Sarbanes-Oxley. A lot of it was knee-jerk reaction. Companies figured with all these new rules and compliance, their board members will be spending more time working on the business, so they increased board compensation. Then there were those who took the wait-and-see approach, and when they did finally increase compensation, it climbed even more.

The difference between a board member's salary and a CEO's salary is still vast.

You cannot do a direct correlation, but, generally speaking, board members make $100,000 annually, all in. A CEO, depending on the size of the company, can make a million to $5 million. So it's at least one-tenth of that salary, at minimum.

Do you anticipate slowdown in the economy having an impact on board compensation?

Not so much. Board members don't get bonuses. Their compensation is fixed. It's a retainer, and there's usually an equity grant of, say, $50,000 worth of stock annually. If you chair a committee, you get something for that because you are in charge of preparing the materials for meetings. Besides that, there is not much variability.