Going for Gold

by Elizabeth Judd

December-January 2005

Corporate secretary pay has not risen in line with the massive jumps in pay of the top executives and boards, but help may be on the way.

It's a truth universally acknowledged that in the post-Sarbanes-Oxley world, the corporate secretary enjoys a greatly expanded role in forging the destiny of today's public companies.  What's less well known is that the annual compensation of the average corporate secretary has remained almost flat over the past five years, according to anecdotal evidence as well as the 2004 survey data from the Society of Corporate Secretaries and Governance Professionals.

"Our perception is that corporate secretaries are not making more," says David Smith, Society president.  "And if that's true, it's a shame since they're working more, especially in the post-Sarbanes-Oxley world we live in."

As the survey has been thoroughly revised since it was last conducted in 1999, the data does not give a clear answer to the question of how much exactly corporate secretary salaries have risen in the last five years.  "We can't compare apples to apples, but whatever raises there have been were small," says Geoff Loftus, vice president at the Society.  And while corporate secretaries – like other executives – are receiving compensation in stock options and grants of restricted stock, here, too, "it doesn't look like there was much of an increase in these forms of compensation over our 1999 survey," he says.

The Society survey does not suggest corporate secretaries aren't well compensated – they are.  Those with law degrees, multiple titles, and some seniority are, on average, taking home total cash compensation of $409,000 a year.  But the rising corporate governance title hasn't lifted all boats – not by a long shot.

One theory for the lack of compensation growth is that corporate secretaries are victims of their own supreme competence.  Dennis Codon, a partner at Los Angeles-based law firm Robins, Kaplan, Miller and Ciresi and former corporate secretary and general counsel at energy company Unocal, puts it this way:  "One thin about corporate secretaries is that often they do their jobs so well.  It's like a great baseball player who makes it look easy.  Sometimes management might not appreciate how hard it is to get someone who can handle all those functions and the compensation might not be high enough."

What makes the big-bang difference for a corporate secretary's compensation?  No questions, it's the law degree.  The Society survey found that respondents with law degrees averaged almost twice as much by way of compensation as their non-lawyer counterparts.  Specifically, the Society found that the average total cash compensation for someone with a corporate secretary title without a law degree was $127,000.  This figure rose to $254,000 for non-lawyer secretaries who also had an executive vice president (EVP) or senior vice president (SVP) title along with another title such as CFO.

As those data suggest, the next most important factor for a corporate secretary's compensation is the number of titles a given individual holds.  "If you're a corporate secretary, on average, you make less than someone who's the secretary and associate general counsel or the general counsel itself.  And if you have a VP title, you tend to make more," Loftus says.

Recognition within a public company generally takes the form of traditional executive titles.  "The VP-ship is like having a general's title or an admiral's title.  It's an acknowledgement of your seniority within the place," observes Loftus.  When asked whether a promotion in title is usually accompanied by an increase in compensation, one corporate secretary said "I should certainly hope so."

What's more, having the title of VP, EVP, or SVP also correlates with greater job security.  The Society survey also show that, unlike the average corporate secretary, individuals with these titles tend to have a change in control agreement, protecting their jobs in the event of a hostile takeover or other buy-out.  In fact, the highest percentage of control agreements (73 percent) were given to corporate secretaries who held the EVP or SVP title plus another title such as general counsel.

Compensation may also come in different forms once you climb the corporate ladder.  "If you have some form of VP title, you're much more likely to have stock options or stock in some form as compensation than if you don't have that title.  It's part of the whole recognition thing," explains Loftus.

Although some clear trends have emerged, the corporate secretary's career path is muddied by the ways in which the position can straddle departments and functions.  It seems no two corporate secretaries are quite the same, nor are their job descriptions.  Loftus notes that the chain of command doesn't always indicate the importance of the position or it's level of compensation:  "You get a lot of blurring," he says.

It's even impossible to generalize about whether corporate secretaries are considered senior executives and would therefore participate in the executive compensation packages their companies provide.  A slight majority – 51 percent – of respondents to the Society survey were not participants in their companies executive compensation plans.  In fact, 83 percent of them did not even have employment agreements.

And yet the significance of the role is clear when you look at corporate hierarchy.  Almost half of all corporate secretaries report to the CEO, and slightly fewer answer to the general counsel.

More than for most executive positions, a corporate secretary's career path seems to follow its own logic.  Gwenn Carr, SVP and corporate secretary at MetLife, notes that her title has varied from employer to employer.  At industrial engineering company ITT, where she worked until she came to insurer MetLife five-and-a-half years ago, her title was vice president, secretary, and associate general counsel.  That corporate secretaries have such a wide variety of backgrounds, duties, and even job titles means compensation is by no means a lockstep affair.

Raking in the Dough

Some question the value of compensation survey data for corporate secretaries, given that their titles and responsibilities vary so greatly.  Aaron Williams, president of St. Louis-based Aaron Consulting, a nationwide attorney search firm specializing in corporate counsel assignments, takes exception to the survey data, observing that "different industries pay differently, and different companies have a different philosophy of compensation."

That said, Williams maintains that the new job responsibilities corporate secretaries are performing have already begun to translate into higher salaries and other forms of executive compensation.  He's seen "companies are definitely mandating that corporate secretaries are current on regulations and have implemented programs related to Sarbanes-Oxley" – experience that's worth more in terms of pay.  According to Williams, even corporate secretaries who are not general counsel are garnering more monetary appreciation:  "Whether companies are looking for corporate secretaries or general counsels, the role is more important, more visible, and it has raised the compensation."

In November, he saw this play out as he sought to fill a vice president, general counsel, and corporate secretary slot at a public company.  "The first thing they asked for was Sarbanes-Oxley experience.  The second thing was corporate governance experience.  And the third thing was the stuff that typically would relate to a standard general counsel opportunity," says Williams.  Because corporate governance experience is in such high demand and the supply of qualified professionals is limited, individuals with the right backgrounds can command much higher compensation.

Finally, compensation over the past several years may have been depressed by the performance of the stock market as a whole, argues Carr.  She says executive compensation in corporate America has "flattened out because of volatile corporate performance.  If you have a position at the senior levels, a substantial part of compensation is the incentive awards, and incentives tie into the company's performance overall."  Carr therefore believes the averages don't speak to the experiences of all corporate secretaries.  "If a company has a good year, however that company defines a good year, you'll have strong incentive pay," she says.

Codon and others are convinced compensation for corporate secretaries will inevitably rise.  "When I became corporate secretary [at Unocal] in 1990, corporate governance wasn't even on the radar screen.  As that evolved, particularly at the end of the 1990s with all of the corporate scandals, there's more attention on the job and more appreciation," he says.  "I think there's been some lag in compensation for secretaries, but from what I've seen, it's catching up.  Corporate secretaries should be highly compensated given the responsibility that attaches to the job."  Codon continues:  "And as the corporate secretary moves into the governance arena and becomes the chief governance officer...yes, it's a job that should be well compensated."

Another sign higher compensation may be on the horizon is the astronomic rise in directors' pay.  A survey released by Towers Perrin in August found that total compensation for members of the board of directors rose by 19 percent in 2003, with "lead directors" and members of the audit committee receiving additional fees on top of that.  Meanwhile, according to a survey by Mellon Human Resources & Investor Solutions released in the fall of 2004, compensation for directors had increased 30 percent year over year.  Mellon also found that, on average, a director's total compensation equals around $140,000 annually.  Although there are important differences between the corporate secretary's job and that of a board member, both positions are increasingly in the limelight.

Take the Money and Run

Higher compensation is already materializing for some corporate secretaries who are footing a heavier load of board meetings.  Brendan Sheehan, an analyst at London-based BoardEx, a consulting firm that analyzes boards of directors, has found that corporate secretaries are being paid for additional time spent at corporate governance committee meetings.  How much extra pay this amounts to depends on the committee schedule since some governance committees meet four times a year and others meet monthly.

Sarbanes-Oxley and the whole climate of heightened attention to corporate governance have compelled most corporate secretaries to assume greater responsibilities.  To illustrate, approximately 80 percent of respondents in the Society's compensation survey said their workload and hours had increased because of Sarbanes-Oxley.  But how do you make the leap from assuming new responsibilities to a fatter paycheck?

Getting that raise isn't always easy, says Loftus.  "Many people – if they're smart and have a little bit of chutzpah – will go to their bosses and say, "I've been doing XYZ for a long time, and it's not part of my original job.  I'd like to be recognized, and I'd like the recognition in the form of a title and larger compensation," says Loftus.  "If you're lucky, your boss will do something about it."

Carr's recent experience bears out the notion that public companies gladly promote performers who step up to the plate.  Carr was given the senior vice president title in October to recognize the fact that she'd assumed responsibility for shareholder services operations and had capably done the job for some time.  Carr attributes this promotion to Met Life's talent review process.

And yet not all responsibilities can – or should – be reflected in one's title.  Carr points out that she is also responsible for corporate governance at MetLife and its subsidiaries, but she isn't the chief governance officer (CGO).  When asked whether she aspired to that title, too, Carr laughs:  "I know the title of chief governance officer is in vogue now.  But I think the corporate secretary is an important title.  I don't need it."