TO shareholders weary of watching corporate mishaps with little, if any, discernible intervention from boards, all directors are suspect. But some, to paraphrase George Orwell, are more suspect than others.
They are trophy directors who sit on many boards and can navigate corporate America's wood-paneled board rooms as easily as their own homes. Among directors of the Fortune 1,000 companies, they include well-connected types like Frank C. Carlucci, the former Defense Secretary who according to 1996 proxies sits on 14 corporate boards, and Ann D. McLaughlin, the former Labor Secretary who sits on 11, as well as lower-profile executives like Raymond S. Troubh, who occupies 15 board seats, David T. Kollat (also 15), Claudine B. Malone (11) and Willie D. Davis (11).
Their clout could be enormous in corporate America. Yet, many shareholders ask, do these directors have the time to be vigilant representatives of investors? And, if they are making a bundle in the board room -- five-figure retainers from each board, plus meeting fees and perks -- will they challenge chief executives who prefer directors to be docile?
"A C.E.O. who doesn't want to be monitored closely wants a director with lots of board seats," asserted Charles Elson, a professor who specializes in corporate governance at the Stetson Law School in St. Petersburg, Fla.
Just Tuesday, a panel of governance experts questioned whether "star directors" added anything but sparkle to a board, and recommended that senior executives serve on no more than two boards and that others on no more than six.
Try as they might, though, shareholders determined to break up the cozy directors' club that often coddles chief executives have been frustrated in their attempts to home in on individuals. Information about directors is scarce and scattered. And boards are collective bodies, so no action, or lack thereof, can be pinned to an individual. Last spring, for example, the Teamsters' pension fund tried to identify the nation's "least valuable directors," but was widely criticized for relying on old data, attendance records and a less-than-rigorous examination process.
New analyses for The New York Times of the available data show that investors have reason to be concerned about ubiquitous directors. Many indeed have much at stake and must be hard pressed to find the time to provide the scrutiny that board service demands. Worse, they seem to cost shareholders money.
Even so, the number of people who sit on multiple boards is growing, not shrinking. Last year, 68 directors of Fortune 1,000 companies sat on nine or more corporate boards, up from 36 who did so in 1991, according to Directorship, a consulting firm in Greenwich, Conn. The number with eight board seats rose to 54, from 40.
Yet as a class these brand-name directors add no value to corporate performance and seem to be a drain on resources. When Graef Crystal, a corporate compensation expert in San Diego, looked at the performances of the 256 companies whose boards have one or more of these directors, compared with the rest of the 1,554 companies in the Standard & Poor's indexes of large-capitalization, mid-cap and small-cap companies, he found no statistically significant difference in their returns to shareholders over three years.
Mr. Crystal did find, however, that those 256 companies paid their chief executives and directors more than the companies' size and shareholder returns would suggest, and by a statistically significant amount: on average, the overpayment came to about 6 percent in both cases.
Tellingly, the overpayment increases, Mr. Crystal found, when two or more trophy directors adorn a board, which is the case at 64 companies including Time Warner, Kmart, Xerox, American Express, Allied-Signal, Sara Lee, Dow Jones, Fluor and Aon. These 64 companies, as a class, overpay their chief executives by more than 13 percent, compared with their peers in size and performance, and overpay their outside directors by nearly 20 percent by the same measures.
To reach his conclusion, Mr. Crystal added up the compensation given to the directors and chief executives and redistributed it, based on the company's size and performance. To judge size, he looked at revenue, invested capital and the number of employees, and to gauge performance, he examined stock-price appreciation and reinvested dividends. From these calculations, he determined "competitive pay," which reflects what each company would pay its chief executive and directors if pay-for-performance measures were used.
"Celebrity directors are worse than useless," Mr. Crystal said. "They bring more debits to the table than credits." The likelihood of this "unmistakable pattern" of overpayment happening by chance, he added, is less than 1 in 100 with regard to chief executives and less than 1 in 1,000 for outside directors.
The pattern does not hold for all brand-name directors. Henry R. Kravis and George R. Roberts, of Kohlberg Kravis Roberts, sit on more than a dozen boards, but the five companies for which performance could be tracked tend to pay their chief executives less than their size and performance suggest. Directors' pay at those companies came in about right.
BUT Mr. Crystal said he found an astounding connection between some celebrity directors and overpayments by the companies where they served. For example, Joseph A. Califano Jr., the one-time Secretary of Health, Education and Welfare, is a director of nine companies. Excluding three that were not in Mr. Crystal's data base (two are subsidiaries of a larger company), the remaining six, as a group, overpay chief executives by 281 percent and their directors by 71 percent, by Mr. Crystal's reckoning.
Such overpayment cannot be ascribed solely to one director, of course, but these brand names seem to set off a phenomenon common in the world of compensation. "They ratchet it up," said Ira M. Millstein, a governance expert at the law firm of Weil, Gotshal & Manges in New York. "You can't pay one director more than the others, and then you automatically increase your C.E.O.'s pay, too."
Itinerant directors can make quite a haul. Various surveys show that the average company pays each outside director about $33,000 a year. But some pay much more, and the dribs and drabs add up for the superbusy. In 1995, Allen F. Jacobson, the former chief executive of Minnesota Mining and Manufacturing, reeled in compensation of more than $785,200, including cash, pension benefits and the present value of stock options, from 10 of his 11 board seats, according to Mr. Crystal.
It is impossible, however, to determine if Mr. Jacobson is the highest-paid independent director for 1995. Other directors sit on the boards of foreign or private corporations that have no disclosure requirements, or of companies outside Mr. Crystal's 1,554-company data base. Also scrambling the picture is the mix of pay -- retainers, fees for board and committee meetings, bonuses for heading committees, payment in stock and in options, pension benefits and perquisites like products and charitable contributions made in directors' names.
Even setting aside benefits and stock options, the pay can hardly be called chump change. In 1995, for example, Ms. McLaughlin probably pocketed more than $352,250 in cash from her board seats, based on information from Directorship. That total excludes fees from Sedgwick Group, a British insurer, and from Potomac Electric Power, which is in the midst of a merger and did not file a 1996 proxy statement. It also excludes some cash she probably received for attending committee meetings at several companies, because proxy statements often do not disclose the frequency of committee meetings or attendance at them.
Ms. McLaughlin did not return telephone calls seeking comment.
Vernon E. Jordan, senior partner at Akin, Gump, Strauss, Hauer & Feld, a Washington law firm, and a close friend of President Clinton, probably took home even more cash -- at least $463,150, calculated on the available information from the eight companies for which he is a director. That sum does not include payments for his directorship at Revlon Group, which recently went public.
Mr. Jordan declined to answer questions about his board service.
To shareholders worried about their investments, a trophy director's pay is a problem not only because the money seems to be wasted, but also because these big sums create strong ties between directors and incumbent chief executives. "These directors do have more at risk," said Nell Minow, a principal at Lens Inc., a Washington-based investment group. "If you aggravate the C.E.O. of one company, word gets around. And you want to be a team player."
The more boards someone is on, investors say, the less likely he or she is to disturb the status quo -- even when it needs to be.
"That's the problem with boards -- the team-player culture," Ms. Minow added.
Shareholder questions about time constraints also appear to be legitimate, especially for people whose job schedules are already demanding.
John L. Clendenin, the chief executive of the BellSouth Corporation, sits on the boards of nine Fortune 1,000 companies including his own. William P. Stiritz, chief executive of the Ralston-Purina Company, is a director of nine companies, including Ralston. Joseph P. Flannery, chief executive of Uniroyal Holding Inc., sits on eight corporate boards including his own -- as do Walter Scott, the chief executive of Peter Kiewit Sons', and Orin R. Smith, chief executive of the Engelhard Corporation.
How stretched are they? Consider Mr. Clendenin. All told, he is expected each year at 60 regular meetings of his corporate boards, which include RJR Nabisco, Wachovia, Equifax, Kroger and Home Depot, based on data from Directorship. He sits on 17 committees for those 9 boards, and serves as chairman for 5 of the committees. All have meetings, usually at breakfast before the full board meeting. Boards frequently have dinners for directors the evening before.
Three boards on which he is an outside director are in Atlanta, BellSouth's home, but he must travel to meetings of five companies based in New York; Cincinnati; Louisville; Winston-Salem, N.C., and Fort Mill, S.C.
That does not include the hours needed to read preparatory material and keep up with each business. Surveys suggest that directors spend 190 hours -- or more than four 40-hour workweeks a year -- on each board. "If you're a C.E.O. on eight boards, that's eight months of the year when you're doing someone else's work," said Mr. Elson, the law professor. "That means you're not doing your work, you're not doing your boards' work, or a combination of the two. It's terrible no matter how you look at it."
MR. CLENDENIN disagrees. He regularly works 5 A.M. to 7 P.M. at BellSouth, where in his 12 years as chief executive he has run up a respectable record of profits. When he attends board meetings, he said, "I do double duty," tending business for BellSouth at his destination.
Mr. Clendenin does not appear to skimp on attendance: Companies are required to disclose the names of directors who do not attend, in person or by phone, at least 75 percent of all board and committee meetings, and none cited him in 1995.
As for preparatory work, "it's all stuff I do at night and on weekends," he said.
Board critics who want to limit multiple directorships "assume that all the homework should take place between 8 and 5, and that's nonsense," Mr. Clendenin said. "Every board I'm familiar with sends materials to board members all the time, all month long. There's a constant flow of information, so you can do it at your leisure."
In return for his service, Mr. Clendenin said he took home marketing expertise that he applied at BellSouth. He also, by Mr. Crystal's accounting of cash, stock and benefits, earned $492,900 in 1995 from all his boards. BellSouth paid him $8.1 million in total compensation.
Mr. Clendenin does not fare too badly on Mr. Crystal's value scale of brand-name directors. While his nine boards, as a class, overpay their chief executives by 23 percent, they pay outside directors about 16 percent less than their size and performance would suggest.
That is not a wash to shareholders -- chief executives earn much more than directors -- but it is less striking than Mr. Califano's corporate record. Of the six boards on which he serves for which data were available, only Chrysler seems to have pay nearly in sync with size and performance.
Mr. Califano, who is now chairman of the Columbia University Center on Addiction and Substance Abuse, pocketed $626,000 in cash, stock and benefits in 1995 from the six boards, Mr. Crystal calculated.
LILYAN H. AFFINITO, a retired executive who holds eight board seats, provides another illustration. In 1995, she earned $397,900 from her six public-company boards. And they, as a class, overpaid their chief executives by 73 percent and their outside directors by 26 percent. Ms. Affinito is a director at Caterpillar, Jostens, Lillian Vernon and Tambrands. Along with Mr. Califano, she sits on the boards of Kmart and Chrysler, and she sat on the boards of two subsidiaries of Nynex that have recently been disbanded.
Mr. Califano and Ms. Affinito did not return calls seeking comment.
Only single-minded skeptics would suggest that chief executives and boards choose trophy directors specifically to raise everyone's pay. Experts in corporate governance cite other reasons star directors are popular. Because their names are known from other boards, they enjoy more credibility on Wall Street than unknowns. Movers and shakers like Mr. Jordan bring glamour by association to the chief executive and to the company. And then there is access.
"If you ask C.E.O.'s, they say these directors open doors in a quiet, legitimate way," said Mr. Millstein, who headed the commission assembled by the National Association of Corporate Directors on board standards. "The argument is that you can buy that, and you should buy it. If you want someone to get you access, you should retain them as a consultant."
The report's publication could mark a turning point. "People have begun to see the makeup of boards as a management problem," said Mr. Elson, also a member of the commission, which suggested that financial literacy should be a requirement for service and recommended limits on multiple directorships. "I think anyone who sits on seven or more boards will become inherently suspect in the financial community."
A lack of information has stymied shareholders. They have so far had little choice but to focus their protests on directors who have poor attendance records or who have done something egregious, like sharply increasing a chief executive's pay as the company's stock hit the skids.
The road to change, then, will probably begin with demands for more information. "People will start clamoring for disclosure, at least of how much directors are paid," said Patrick McGurn, a vice president of Institutional Shareholder Services, a consulting firm in Bethesda, Md.
AS demands for better boards grow, the notion of how many directorships are appropriate is changing in some corners.
"If you're going to be a responsible board member, you can't just look at the numbers -- you've got to learn about what makes the business tick," said James E. Preston, chief executive of Avon Products. "And that means sitting down with people and learning the key indicators and the culture, and what is the value system and why is it that way, so you have some basis on which to ask questions and to arrive at conclusions."
Mr. Preston has limited his commitments to three outside boards.
His attitude, paradoxically, goes some way in explaining the increase in brand-name directors. "The demand for directors is outstripping the supply," said Dennis C. Carey, co-director of board service for Spencer Stuart, a top search firm. "The ratio of turndowns to acceptances is running 6 to 8 to one."
The typical search is for a chief executive who manages a complex and global company at least as large as the recruiting company. "Most C.E.O.'s these days are turning down outside commitments, not seeking them," Mr. Carey said. So, he added, recruiters are seeking out "the next generation of chief executives."
For as long as boards have been under scrutiny, executives, investors and experts have struggled with what makes a good director. The available evidence shows that the private label looks like a better bet than the brand name.
Photo: Joseph A. Califano Jr. A former Secretary of Health, Education and Welfare, Mr. Califano sits on nine companies' boards. (Neal Boenzi/The New York Times) (pg. 8) Graphs: "Familiar Faces" shows the rising number of directors of Fortune 1,000 corporations with seats on many different boards. (Source: Directorship) (pg. 1); "If It's Tuesday, It Must Be Kmart" compares the actual versus competitive pay of several companies' chief executives and directors, according to Graef Crystal, a compensation expert. (pg. 8) Tables: "Nice Work, If You Can Get It" The 10 companies that paid the most in total compensation to outside directors in 1995, and the average amount paid to each director, from a survey of 1,554 companies, generally those in the Standard & Poor's 500, the Mid-Cap 400 and the Small-Cap 600 indexes. (Sources: Graef Crystal; Standard & Poor's Compustat) (pg. 8) "Who Sits on the Most Boards" These directors of Fortune 1,000 companies were found to sit on the most boards of American companies in 1995 by Directorship, a research and consulting firm in Greenwih, Conn. Graef Crystal, an expert on executive compensation in San Diego, then compiled figures on them from a data base of 1,554 companies, generally those in the Standard & Poor's 500, the Mid-Cap 400 and the Small-Cap 600. For the companies on which data were available, here's how much the directors received in total compensation; what percentage the chief executives of those ompanies were overpaid or underpaid (based on company size and stock market return), and the perentage the boards were overpaid or underpaid, based on Mr. Crystal's analysis. (Sources: Directorship; Graef Crystal; Standard & Poor's Compustat) (pg. 9)