Mellon Survey: Board Member Responsibility and Pay Increasing Dramatically -- 'Reform is the norm' in today's corporate boardrooms -- RIDGEFIELD PARK, N.J., Oct. 13 /PRNewswire-FirstCall/ -- New governance practices have reshaped the boardroom of Corporate America, with significant increases in director pay, responsibility and accountability. These are among the results of the annual "Board of Directors Compensation and Governance Practices Survey" released today by Mellon Financial Corporation's Human Resources & Investor Solutions (HR&IS) business. The study, completed in the third quarter of 2004, reports on the board practices of more than 200 companies. Mellon's survey shows that many companies have adopted significantly more reforms and made a much wider array of changes since last year. Boards are clearly becoming more active. Board meetings are lasting longer; fully a third of survey participants report day-and-a-half or two-day sessions. Equally notable is the increase in the number of board committee meetings. On average, audit committees are meeting eight times a year (double the number of two years ago), and compensation committees typically meet five times, up from four last year. Board structure has also changed dramatically. While few of last year's survey participants reported having a lead director, 48 percent have one this year. Nomination and governance committees are proliferating, rising from 47 percent in 2003 to 75 percent in 2004. Most boards -- 83 percent -- now report they conduct meetings without management being present, up from 55 percent last year. "Commitment to reform has gone well beyond the tentative measures we saw a year ago," said Todd McGovern, a principal in Mellon's compensation practice and corporate governance practice leader. "Boards seem to be increasingly committed to taking a more active and accountable role in corporate governance." More Companies Holding Directors Accountable Just 17 percent of survey participants conducted director performance evaluations a year ago; that number has now more than doubled to 36 percent. While inside directors were almost entirely free from any evaluation process last year (10 percent), more than a quarter of surveyed companies now include them. The practice of evaluating the performance of committee members also doubled in the past year from 22 percent to 45 percent. Total Compensation Increases Total compensation for board members has increased between 20 and 35 percent because of their increased accountability. Actual increases depend on the methodology used to value stock options; increases would be even greater except for the effect of relatively low stock prices. Other findings of Mellon's survey include: - Almost 100% of survey participants now pay board and committee chairmen more than committee members; - 41 percent of companies differentiate chairmen retainers by committee, with the audit committee typically at the top of the scale. Only 21 percent made this distinction in 2003; - Equity compensation is offered to directors by more than 90 percent of the survey participants. However, the number of companies granting stock options declined, from 93 percent last year to 82 percent this year; and - 37 percent of companies now require directors to own company stock, increasing from 21 percent last year. The breadth and depth of these changes indicate that board reform has taken root and is likely to accelerate further. "Many boards have been so focused on dealing with critical issues like executive compensation, that they have had relatively little time to take action on their own pay practices," said McGovern. "As they get their priorities in order, it is likely that we will see even more fundamental change in the coming year." Human Resources & Investor Solutions is the worldwide human resources and shareholder services business of Mellon Financial Corporation, a global financial services company. Headquartered in Pittsburgh, Mellon is one of the world's leading providers of financial services for institutions, corporations and high net worth individuals, providing institutional asset management, mutual funds, private wealth management, asset servicing, human resources and investor solutions, and treasury services. Mellon has more than $3.6 trillion in assets under management, administration or custody, including more than $675 billion under management. Its asset management companies include The Dreyfus Corporation and U.K.-based Newton Investment Management Limited. News and other information about Mellon is available at http://www.mellon.com/ . An executive summary of Mellon's "Board of Directors Compensation and Governance Practices Survey" is available to the media by contacting Ed Gadowski at (201) 373-7336. It is available to other interested parties by contacting Eela Javid at (415) 617-3920. DATASOURCE: Mellon Financial Corporation CONTACT: Ed Gadowski of Mellon Financial Corporation, +1-201-373-7336, or Web site: http://www.mellon.com/

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