The Easiest Path to a Million Dollars

If you've been looking for the holy grail of lickity-split wealth creation, then you're in luck because I've found it. In all likelihood, your total work days will equate to less than two months per year, and if you miss a quarter or so of the meetings, nobody will get bent out of shape. You'll have to travel for most of the days that you'll work, but all travel expenses will be reimbursed -- and don't worry, reimbursement policies are liberal.

And the payoff? Within two years you'll very likely be a millionaire. Maybe sooner.

So what is this mystery dream job? It's a corporate board member.

The big money nobody talks about
When I die, I want to come back as a board member. Just take a peek at these mouth-watering numbers.

Board Member

Boards Served

Total Annual Board Meetings

Total Compensation

Compensation Per Board Meeting

George Munoz Altria (NYSE: MO  ) , Anixter International, Marriott International 18 $695,359 $38,631
Floyd Loop Intuitive Surgical (Nasdaq: ISRG  ) , Tenet Healthcare (NYSE: THC  ) 13 $651,711 $50,132
Michael Boskin Oracle, ExxonMobil 19 $956,231 $50,328
Millard Drexler Apple (Nasdaq: AAPL  ) 5 $1,076,258 $215,252

Source: SEC filings.
Note: Total board meetings include company annual shareholder meetings. Board seats and total compensation excludes private company boards.

In addition to the board meetings listed in the table, these directors may have attended some other meetings. Independent directors often have additional meetings on their own and to the extent that these folks serve on board committees -- audit committee, compensation committee, etc. -- they often attend separate meetings for those as well.

But you've got to admit, those are pretty incredible fees. Those per-meeting numbers are like Justin-Bieber-at-your-daughter's-birthday money. Heck, for that much he might even sing a couple songs and make eye contact.

In the hullabaloo over executive compensation, I don't know that I've seen anything that looks at what directors are paid. Perhaps it's because it's easy to overlook since the numbers are markedly lower than what named executives are pulling in. But considered in relation to the board members' time investment in the company, the pay can be considerable, if not excessive.

Heavy hitters
Maybe it simply has to be this way. After all, many large-company boards have some folks with serious resumes overseeing things.

From the list above, Munoz was the founder of an investment banking group, a partner at a law firm with his name on it, and was a former Assistant Secretary and CFO of the U.S. Department of Treasury. Floyd Loop was the CEO of the Cleveland Clinic after spending 30 years as a cardiothoracic surgeon. Mickey Drexler was the former CEO of Gap and the current CEO of J. Crew. And I'm sure you'd recognize the name of one of Drexler's fellow Apple board members, Al Gore.

But strangely this doesn't seem to hold from company to company. Apple saw fit to pay its directors between $800,000 and $1.3 million while Microsoft (Nasdaq: MSFT  ) got away with paying most of its directors around $200,000. And Microsoft's board can claim a former JPMorgan Chase CFO, a former Merck CEO, and Netflix founder Reed Hastings, among others.

Intuitive Surgical, a company with a $14 billion market cap, thought it necessary to pay most of its directors more than $400,000. Coca-Cola  (NYSE: KO  ) a company roughly 11 times Intuitive Surgical's size and that held more than twice the number of board meetings, was apparently able to fill its board with highly qualified members that were willing to serve for around half of what Intuitive was paying.

And, as is often the case, Berkshire Hathaway (NYSE: BRK-B  ) makes everyone else look terrible. In 2010, its highest paid board member received $6,700. Total. And Berkshire doesn't pay for directors and officers liability insurance -- a protection typically provided for board members at other companies.

Should we really care?
Yes! Of course we should care! For starters, investors need to consider whether big board fees are a wise use of shareholder capital. There are obviously well-qualified people out there willing to fill board seats without requiring outlandish remuneration. Does Al Gore really bring that much to Apple that his presence on the board and attendance of a handful of meetings per year is worth nearly $1.3 million?

Shareholders might also want to ponder what it means for the company when it pays huge fees to the board. Do priorities and motivations change when directors are receiving $200,000 versus three or four times that? Maybe higher-paid board members actually work harder. Or maybe they just more concerned with getting kicked off the gravy train.

And if the kind of compensation given to some of boards of directors burns you, consider this: In almost all cases, it's the board of directors that sets the board of directors' compensation policies.

The final say
Of course, in the end, it's the company's true owners -- the shareholders -- that have the final say. With proxy materials either already in the hands of shareholders or soon on their way, owners have the opportunity to vote against a board that is excessively compensating itself. And if you're feeling extra outspoken, most proxy letters include instructions for filing shareholders resolutions for inclusion in next year's proxy materials.

That said, investors also have the opportunity to vote with their money by selling stocks of companies with overly generous pay packages and focusing on those that have more reasonable policies. In fact, you can add a few of those latter companies to your Foolish watchlist right now:

Berkshire Hathaway, Coca-Cola, and Microsoft are Motley Fool Inside Value recommendations. Intuitive Surgical is a Motley Fool Rule Breakers pick. Apple, Berkshire Hathaway, and Netflix are Motley Fool Stock Advisor recommendations. Coca-Cola is a Motley Fool Income Investor pick. The Fool has written puts on Apple. Motley Fool Options has recommended a bull call spread position on Apple. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Altria Group, Apple, Berkshire Hathaway, Coca-Cola, ExxonMobil, JPMorgan Chase, Microsoft, and Oracle. Motley Fool Alpha LLC owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer owns shares of Berkshire Hathaway and Microsoft, but does not have a financial interest in any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


Read/Post Comments (18) | Recommend This Article (74)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 08, 2011, at 4:51 PM, pryan37bb wrote:

    "Does Al Gore really bring that much to Apple that his presence on the board and attendance of a handful of meetings per year is worth nearly $1.3 million?"

    Well, he DID invent the Internet...

  • Report this Comment On April 08, 2011, at 6:34 PM, joaquingrech wrote:

    @pryan37bb i guess that myth will never die: http://www.snopes.com/quotes/internet.asp

  • Report this Comment On April 08, 2011, at 6:52 PM, David369 wrote:

    If I made up a fake resume and got on a board that paid big, would that be illegal or just unethical? Now I realize lying seems to be ok in politics but I'm not so sure if there is a law against it in business or not.

  • Report this Comment On April 09, 2011, at 10:56 AM, caltex1nomad wrote:

    Thanks Matt......I always look at compensation packages for Board members when I get the shareholder material. You should also look at how many shares of the company they are receiving. In most cases I always vote against increases in compensation for Board members be it in the form of cash or stock.

  • Report this Comment On April 09, 2011, at 1:13 PM, awallejr wrote:

    That's is a just a further illustration of how the rich get richer and the poor get poorer. The sums these Directors make, as well as CEOS and other corporate executives are obscene. During the last ten years their wage growth rate literally crushed the wage growth rate of the average worker. Look at the sums Ken Lewis of BAC made for turning a $50 stock into at one time a $3 stock.

  • Report this Comment On April 09, 2011, at 1:42 PM, hedgemore wrote:

    Berkshire's board has 3 non-independent members;

    1) W. Buffet

    2) C. Munger

    3) D. Hamburg (CFO)

    ..and 9 so called "Independent members" including BIll Gates. But how independent is Gates given Buffet's investment in the Gates foundation? R.Olson a partner at Munger's law firm...no conflict there, right? and Howard Buffet, son of Warren Buffet. And Scott who is a 1 of 3 members of the Berkshire governance committee was found to be an "Independent member" of the board by the same committee.

    Anyone else see a trend developing?

    For more read Francine McKenna's article on Forbes.com "Corporate Governance At Berkshire Hathaway: Maybe It’s Not All That"

    Keep Foolish!

  • Report this Comment On April 09, 2011, at 3:15 PM, pastreet wrote:

    I just hope that these board members remember they are only proxies for the shareholder.

    All too often these men and women are paid exorbitant fees for driving companies into the ground. During the sub-prime crisis and while investment banks were systematically and greedily driving our nations economy into the ground, these men and women were making obscene profits while authorizing huge bonuses for management and high level employees.

    As a stock holder, you OWN the company. Because so many investors today are hands off now and let investment organizations pick stocks that are actively traded, there seems to be no accountability.

    Lets bring back the stockholder as the company's owner and restore some corporate accountability. That's the difference between Berkshire Hathaway and many other Wall Street companies. Accountability, sustainability, and common sense.

    Pat

    www.compoundingreturns.com

  • Report this Comment On April 09, 2011, at 3:24 PM, MegaEurope wrote:

    "Coca-Cola (NYSE: KO ) a company roughly 11 times Intuitive Surgical's size..."

    KO has 84x the employees, 30x the trailing revenue, 25x the assets and 18x the trailing cash flow compared to ISRG. Market cap is not equivalent to "size".

  • Report this Comment On April 09, 2011, at 3:33 PM, xetn wrote:

    I'm sure they all "earn" their director fees, with all of that travel and dinners and stuff that must be done.

  • Report this Comment On April 09, 2011, at 3:52 PM, DHeavy wrote:

    I am a member of a board of a small public company. One day I hope to see compensation like these guys. Right now, all I have are some options.

    DHeavy

  • Report this Comment On April 10, 2011, at 2:41 PM, SPARTANBURG wrote:

    I can't imagine anyone having so much knowledge relative to his other peers that he can be compensated 200 more times per meeting. I can, however, imagine someone being paid 1.2 million for 5 meetings because he can pick up the phone and call someone who can erase allegations against the company he works for or create opportunities from thin air. After all, five meetings per year is pretty much thin air.

  • Report this Comment On April 11, 2011, at 1:20 AM, osucowboys344 wrote:

    In order to be on the board of directors of any company, you better have a very good business background. I don't even know how you would become a member on the BOD of a major company without making millions before unless you knew someone.

  • Report this Comment On April 11, 2011, at 10:38 AM, mtf00l wrote:

    I've posted this before and tried to find the post to link to. Every time the subject of making money in the stock market comes up I submit the best and quickest way is to buy a seat on the board. Not everyone has that kind of liquid cash. Myself included.

  • Report this Comment On April 11, 2011, at 10:42 AM, mtf00l wrote:

    The other capital for "buying a seat on the board is "connections" public and private. If you are a former Vice President, you have "capital".

  • Report this Comment On April 11, 2011, at 2:02 PM, Charnar wrote:

    To play devil's advocate for a second...

    Isn't it helpful to a company to have Directors that swing a big stick with the heavies in DC (or their home state)? It might be worth half a million to a company to have someone with a lot of clout advocating for them in Washington.

    Not that I agree this system is desirable (or even ethical) for the country as a whole, but if that's the way the game is played, you play it to win, no?

  • Report this Comment On April 11, 2011, at 3:29 PM, Ikarruss wrote:

    Does the BOD that make that amount of CASH stay bought, I think that the whole situation is no just the pay. How does a share holder, even a big one inshure a turely independent derectors loyalty?

    (cash can't be the only way....)

  • Report this Comment On April 15, 2011, at 5:54 PM, shbeavers wrote:

    And I thought the easiest path to a million dollars was to start with $2 million and spend half of it on lavish living...

  • Report this Comment On April 17, 2011, at 9:23 AM, tandemaniac wrote:

    Thanks for the article Matt. Makes me appreciate more owning shares of coca-cola and Microsoft and less inclined to buy shares of Apple or Berkshire Hathaway.

    It's important to consider more than just financials when buying shares in a company. Ethics and morals do matter. Even though I may be passing up some profits, I'm not going to be part owner of a company with questionable standards.

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