REIT Directors Earn
Better Pay in 2003

NEW YORK -- Real-estate investment trusts plan to boost board members' pay by an average of 25% in 2003, reflecting their additional responsibilities in light of recent corporate governance issues, a study shows.

The increase is significantly higher than the 5% to 8% raises REIT directors have averaged over the past five years, said Bruce Schonbraun, managing director of Schonbraun Safris McCann Bekritsky & Co., the real-estate consulting and accounting firm that conducted the survey.

By contrast, he said, senior executives are getting only modest increases on average.

The higher paychecks for board members reflect the additional duties put on them in light of corporate governance issues and the Sarbanes-Oxley Act, which insists independent directors make up at least a majority of a company's board, Schonbraun said.

"REITs are trying to attract new applicants" who are willing to take on the added responsibilities and risks associated with today's corporate governance laws and other compliance issues, he said. Board directors today have a much greater say in how a company is run than they did five years ago, he said.

The study also found that REITs are willing to pay additional retainers of $5,000 to $10,000 to board committee chairmen on top of their base salaries. "Twenty five percent to 28% of all REITs are paying extra sums to the committee chairmen," he said. "Three or four years ago, this was nonexistent."

Larry Portal, a partner and co-head of the firm's national compensation consulting practice, said the higher salaries reflect how "board members and board committee heads are being held far more accountable and their roles much more demanding than they were five or 10 years ago."

The study also found that many companies are using restricted stock, rather than stock options, as part of the compensation package. Five years ago, about 90% of a board member's non-cash compensation was stock options, said Schonbraun. "Today it's about 30%."

The move toward restricted stock is designed to better align a director's interests with those of shareholders. There's a perception that "stock options are slanted toward short-term gains. ... Restricted stock is not," he said.

The study surveyed about 150 REITs.

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