"Many of the old rules continue to apply," Korn/Ferry concludes. ''Getting seated on a board still depends, in large part, on who you know."
What emerges from the study is a portrait of the average board as a homogeneous body steeped in its industry's traditions. And although the board members' chief duty is to hire and fire top management, directors usually are indebted to those managers for perks and pay that have been rising at a pace many working folk would envy.
Compared with 1987, more outside board members - people not otherwise connected with the company - are enjoying pension plans and health coverage. Workloads are down and pay is up 52 percent in the last five years to an
average of more than $350 an hour. And more directors are getting free or cut- rate stock.
But the rites of succession are little changed. "Fully 89 percent of the companies surveyed locate (new) board members through the recommendation of the chairman," Korn/Ferry found.
Is the chairman looking for a gadfly to raise prickly questions, like why top executives get paid so much? Probably not: 80 percent of the board chairmen are the companies' top executives - their chief executive officers.
"There's definitely a need for change," says Cari Christian, executive director of the 65,000-member United Shareholders Association.
"Unfortunately, the board is often beholden to management and answers to the management rather than the shareholders."
The shareholders association wants new federal rules to make it easier for stockholders not on the board to nominate candidates for board seats; traditionally, the only candidates on the ballot are those approved by the board's nominating committee, which is often dominated by management.
This idea of broader nominations, however, has not been embraced by the National Association of Corporate Directors, the board members' trade group. Most board nominations made by shareholders are intended to serve a special interest that's not necessarily good for other shareholders, says NACD chairwoman Jean Head Sisco.
Moreover, she says, many boards already are making themselves more independent of management by establishing nominating committees of outside directors to find candidates for board openings.
"I can assure you that on the boards that I sit on, on the boards that many of our members sit on, that you're seeing a great surge for greater diversity in the selection process," she said, arguing that board makeup is not an appropriate target for legislators.
Gary Silverman, who heads Korn/Ferry's search operation for directors, said he too has detected a greater interest in diversity from nominating committees and CEOs. But Korn/Ferry's study found that boards using nominating committees had dropped from 61 percent in 1990 to 51 percent in 1991. It was 54 percent in 1987.
"For all practical purposes," Silverman says, "when a directory vacancy occurs, a CEO puts together a list of people that he knows that they might contact, and he calls his other directors and says, 'Whom do you know?' They sort of work it out themselves."
In its survey, Korn/Ferry found that the average board member got a raise of only 2 percent in 1991, but still did pretty well. Average annual compensation was $33,133, and the average time spent preparing for and attending board meetings was 94 hours.
That makes average compensation $352 per hour.
In 1987, the average board member worked 111 hours and made $25,720. So while the workload dropped by more than 15 percent over five years, hourly pay increased by 52 percent, and total pay by nearly 29 percent.
In addition to cash, 29 percent of outside directors had stock options, up
from 25 percent in 1990 and 9 percent in 1987, Korn/Ferry found. Nearly 20 percent got stock grants, up from 15 percent the year before. Fifty-two percent had pension plans, up from 42 percent in 1990 and 34 percent in 1987. About 15 percent got medical insurance, up from 13 percent the year before.
In addition, 88 percent of outside directors were reimbursed for travel expenses to board meetings. And lest it be lonely at the top, 32 percent got to bring their spouses at company expense.
When the phone rings, the average outside director has a special reason for jumping up from the dinner table. That's because 73 percent of outside directors were paid for telephone conferences. The average was $853 per phone call.
About 60 percent of the boards had at least one woman member in 1991, compared with 53 percent in 1987. But women still occupied only 7 percent of the directors' chairs, Korn/Ferry found. With the average board having 12 members, only 3 percent of the boards had three or more women in 1991, 15 percent had two and 42 percent had only one.
Thirty-eight percent of boards had at least one minority member last year, up from 31 percent in 1987, Korn/Ferry said. But only 4 percent of all board members were minorities last year. One percent of the boards had three or more minority members, 5 percent had two and 32 percent just one.
Asked to describe the ideal outside director, CEOs said they'd most like a top executive from another company, preferably in a similar industry.
Given the pay, benefits and chance to hang out with others of the same background, these jobs aren't exactly going begging. Nearly 80 percent of the CEOs polled said that in the last year, not a single person had turned down an offer to be on their boards.
And the handful of candidates who had to pass said they didn't have the time, couldn't handle the travel - or already sat on too many other boards.
