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Pay for U.S. Corporate Directors Rises Modestly
Cash retainer portion of total pay package jumped for first time in two years

By Stephen Miller, CEBS  9/19/2013
Total pay for outside directors at the largest U.S. corporations has increased modestly. Companies raised annual cash retainers and continued shifting away from per-meeting fees.

Fueled by an increase in cash compensation, total pay for outside directors at the largest U.S. corporations rose modestly in 2012, according to an annual analysis released in September 2013 by HR consultancy Towers Watson. Companies increased the value of annual retainers and continued to shift away from variable forms of pay, which elevated the cash element of directors’ total compensation package.

The annual analysis of director compensation at Fortune 500 companies revealed that total direct compensation (which includes cash pay and annual or recurring stock awards) increased by 3 percent at the median last year, from $220,000 in 2011 to $227,000. That figure is slightly lower than the 5 percent increase in director total compensation in 2011.

Meanwhile, the median value of cash compensation jumped 8 percent last year, to $100,000, driven primarily by the first increase in the median cash retainer in two years. The annual cash board retainer rose by 7 percent at the median in 2012, reaching an all-time high of $80,000.

Compensation from annual and recurring stock awards remained virtually unchanged last year at $125,000, the analysis found.

“Cash retainers are playing a larger role in the compensation mix for outside directors, as the majority of companies have now eliminated meeting fees, reflecting the evolution of director roles to 24/7 commitments,” Doug Friske, global head of executive compensation consulting at Towers Watson, said in a media statement. “While director-pay increases in the early years of this decade were primarily driven by rising equity values, last year’s increase was fueled by growth in cash compensation.”

The analysis also revealed that:

  • The prevalence of per-meeting fees for board meetings dropped from 32 percent to 28 percent over the past year, while the practice of providing meeting fees for committee meetings fell from 37 percent to just over a third.

  • By comparison, the prevalence of flat cash retainers for committee service increased slightly, while the median committee member cash retainer rose from $7,500 to $8,000.

  • The median annual stock award provided to directors stayed relatively flat, at approximately $125,000.

“The demand for experienced, talented directors to serve on boards remains strong and will likely grow as companies address the retirement of long-standing members and pursue greater member diversity,” Friske predicted. “As a result, we expect companies will continue to evaluate their overall director-compensation programs and policies to ensure they are able to attract the best directors to their boards.”

Stephen Miller, CEBS, is an online editor/manager for SHRM.

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