In the published meeting minutes from the March Governing Council meeting, I noticed employees of Council Members who are elected to the Board of Directors and other leadership roles will soon be able to receive compensation for the time they invest in working for Hedera. Can you explain what this new policy is, who will be eligible, and how it will work?
Recently Hedera shared publicly that, with the next phase of decentralization at Hedera and the significant amount of time and effort required of Hedera board members, Hedera’s board members will be eligible to receive compensation, as is standard practice at both public and private companies.
As set forth in Hedera’s LLC Agreement, the Hedera board may have up to seven voting members, all of whom are elected by the Council Members. Board members may be affiliated with Council Members or independent. Hedera board members are expected to:
- Attend all regular meetings as well as ad hoc meetings. Regular meetings are currently held every 2 weeks and typically run for 1.5 to 2 hours.
- Prepare for each meeting by reviewing relevant materials, participating in email discussions, and researching topics under deliberation.
- Leverage their professional expertise and professional networks to ensure informed, effective governance.
- Educate themselves and vote on matters up for board decision, either in meetings or via electronic ballots.
- Act as a representative of the Council to external parties, which may include opportunities for public speaking or engaging with industry bodies and stakeholders.
In light of the considerable time and effort required of board members, individuals who serve on the board and remain in good standing will be eligible for compensation in the form of an hbar grant with a fair market value up to $250,000 per year, provided they meet participation and performance requirements. Hedera Committee chairs may also earn an annual stipend of up to $100,000 in recognition of the time and effort required to serve in these roles, again, provided they satisfy certain participation and performance requirements Consistent transaction signers may receive an annual stipend of up to $50,000 annually for their ongoing work, which includes:
- Attending required meetings to review details and confirm the accuracy of pending transactions, such as the addition of new Council Members to the mainnet, transfers of coins from the treasury account, or updates of the network codebase.
- Having 100% participation in signing transactions during a given calendar quarter. This includes regular monthly transactions and any ad-hoc transactions where a minimum of a 6-day signing window is provided.
- Providing visual evidence of how they are securing the signing device in accordance with Hedera’s Transaction Signing Policy.
- Performing verifiable monthly updates and maintenance of signing hardware to ensure continuing operability and security of signing keys.
These engagement incentive programs are still being designed, which is why more details have not been published beyond the simple reference to the program in the Council meeting minutes. The Hedera Council intends to publish the final set of participation and performance requirements for each role when they are completed and approved.
While Hedera Board Members have not been previously compensated, that is the exception, rather than the norm, when it comes to serving on company boards. Harvard research on Trends in U.S. Director Compensation found that “The total average compensation for S&P 500 non-employee directors from May 16, 2018 through May 15, 2019 was $304,856, as calculated by Spencer Stuart. The total mean compensation for Russell 3000 companies was $167,013, based on 2019 disclosure documents.” In addition, the majority of boards of Russell 3000 companies meet less than 8 times a year; Hedera board is currently expected to meet at least 26 times in 2022 (and those Board meetings are in addition to the expected 12 Council meetings).
The piece below shares more on the Five Types of intelligence and skills required for successful board service, https://hbr.org/2020/01/are-you-ready-to-serve-on-a-board.