As president of Stanford University, John L. Hennessy made $562,177 in salary and benefits in 2003-4. But his annual pay from Stanford is only a small part of how he has added to his net worth. As a corporate-board member of three Silicon Valley technology companies, Mr. Hennessy, a computer scientist, is worth millions in stock options.
In April 2004, when Mr. Hennessy was elected to the board of Google, which runs the wildly popular Internet search engine, he received an option to purchase 65,000 shares of stock in the company for a price of $20 per share. Mr. Hennessy’s shares, which would cost $1.3-million, would be worth about $24.8-million at the share price in early November.
Mr. Hennessy is a former professor and chairman of computer science at Stanford, where Google’s two founders studied as graduate students, so he was regarded by Google as being a natural for its board.
Add to the Google stock options the $1.7-million in shares that he owns by serving on the board, and through other means, of Cisco Systems Inc. (which could only be purchased by paying a substantial exercise price) and his $4.9-million in shares of Atheros Communications Inc., of which Mr. Hennessy is a founder and an initial investor, his stock options in the three companies, although not fully vested and requiring his purchase, could be worth $31.4-million.
Mr. Hennessy clearly represents the glamorous side of corporate-board membership, but he is not alone in the practice among his fellow college presidents. Approximately one-third of college presidents serve on corporate boards, according to a survey of four-year college leaders by The Chronicle published earlier this month (The Chronicle, November 4). For their efforts, which can include dozens of meetings per year, college presidents can add academic credibility to corporations while making connections with wealthy potential donors.
Presidents also receive a payoff, through stipends, meeting fees, and stock options, which can substantially boost their income.
Status and Danger
But college leaders acknowledge that board memberships can have a downside. They can divert a president’s energies from the already-taxing job of a running a college, and negative publicity from a corporate scandal could reflect poorly on board members and could damage a college president’s credibility.
Richard T. Ingram, president of the Association of Governing Boards of Universities and Colleges, says college boards are looking for balance. “It benefits the institution to have your president on a corporate board,” Mr. Ingram says, citing the prestige corporate-board membership can bring and the networking opportunities for presidents.
But Mr. Ingram says governing boards of universities are trying to clarify what the appropriate number of boards is for presidents to serve on, with university boards often setting a limit in presidential contracts.
Only a small number of college presidents sit on multiple corporate boards. Of 688 college presidents surveyed by The Chronicle, about 12 percent sit on more than one board and only 1.2 percent serve on four or more. According to the survey, 68.2 percent of college presidents do not sit on corporate boards.
But even for presidents who are on only one corporate board, the role can be both time-consuming and lucrative.
Mark A. Nordenberg, president of the University of Pittsburgh, attended at least nine board meetings in 2004 as a director of Mellon Financial Corporation, which is headquartered in Pittsburgh, according to documents filed with the Securities and Exchange Commission. He will make at least $55,000 for serving on the board in 2005-6. Mr. Nordenberg also served on board committees that held four meetings in 2004, some of which may have been scheduled on the same days as full board meetings.
More typically, college presidents serve on the boards of local banks or small local or regional corporations. For this service, presidents are paid an annual stipend, usually ranging from $20,000 to $50,000. They also receive smaller payments for attending board meetings and for heading committees.
For example, David P. Roselle, president of the University of Delaware, sits on the board of the Wilmington Trust Corporation, a Delaware-based bank. In addition to receiving a $15,000 retainer in 2004 — half of it paid in common stock — he was paid $2,000 for each board meeting he attended (there were seven in 2004) and $1,200 for each committee meeting. He was also paid $2,500 for serving as chairman of the bank’s compensation committee, and has received options to purchase 23,500 shares of stock.
http://chronicle.com Section: Executive Compensation Volume 52, Issue 13, Page B4
