Outside directors to be paid only in shares

Albert Dunlap, who became chairman of the Philadelphia-based Scott Paper Company in April '94, has persuaded Scott's outside directors to accept company stock as their sole compensation (although out-of-pocket expenses will continue to be reimbursed).

Dunlap says retainers and fees drain the directors' incentives to increase shareholder value. 'What type of a commitment is that?' he says of guaranteed compensation. 'You ought to think like a shareholder.'

Sometimes, Mr Dunlap contends, directors make decisions to 'protect their own jobs' instead of increasing share value. 'That is ludicrous,' he says. While an increasing number of companies are opting to give stock instead of more cash and perks to board directors, sole stock compensation if still rare.

To his directors, Mr Dunlap puts it quite simply, 'If you're in it just for the fee, then I don't think you ought to serve.'