Director stock compensation: An invitation to a conspicuous conflict of interests?

While many aspects of stock and option based compensation for corporate off icers remain controversial, we suggest that the growing trend for similar p ractices in favor of boards of directors will prove to be even more content ious. High-ranking corporate managers do not set their own salaries nor aut horize their own stock options. By contrast, boards of directors do, in fac t, set their own compensation packages. Other potential conflicts of intere st include setting option performance targets, stock buybacks, stock option resets and reloads, consolidations (mergers and acquisitions), and service on multiple boards. As trust is the most valuable commodity in a capitalis t society, we suggest that these potential conflicts of interest and relate d outcomes may ultimately serve to erode any anticipated benefits of direct or stock compensation.