Get access to the exclusive HR Resources you need to succeed in 2018.
Sign up for free email newsletters and get more SHRM content delivered to your inbox.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Build competencies, establish credibility and advance your career—while earning PDCs—at SHRM Seminars in 14 cities across the U.S. this fall.
Gain the skills you need to rise to the next level in your career. Jon us at SHRM's Leadership Development Forum, October 2-3 in Boston.
Tech industry boards are most highly compensated for third year in a row
Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
Total board director compensation among U.S. midmarket companies remained relatively flat in 2010, with a modest 2 percent median increase, taking average board member pay to $110,500, according to an annual board compensation study by accounting and consulting firm BDO USA.
Board directors in retail, technology and health care took home higher pay in 2010 than those in many other sectors. Retail saw a significant increase of 14 percent, attributed to an increased focus on attracting seasoned executives as directors, an increased focus on retaining directors through difficult economic times and improved company performance.
Tech and health care directors' pay increases were more modest at 6 percent and 5.5 percent respectively but still noteworthy given that all other industries remained flat or increased by only 1-2 percent.
Technology, however, remained the most lucrative industry for board members for the third year in a row, with compensation averaging $174,950. This was more than two and a half times the amount of financial services, the lowest-compensated industry, where board directors receive an average of just $68,125.
In 2010, highly compensated tech directors were followed by energy ($139,690), health care ($118,235), manufacturing ($105,200), real estate ($103,860), retail ($97,380), banking ($76,550) and financial services excluding banking ($68,125).
Overall, the average $110,500 pay mix for board directors in midmarket companies was composed of:
Generally, the industries that paid more did so through equity (stock and/or stock options), and at least twice as much value was granted in restricted stock than was granted in stock options. This wasn't surprising, according to BDO, as stock options have lost their luster because of uncertainty in the market. Restricted stock is less dilutive, minimizes the expense in the financial statements and will always deliver some economic value, according to BDO.
Real estate favored restricted stock for directors more than any other industry at $39,620 (38 percent of the pay mix) vs. stock options at $4,280 (4 percent of the pay mix). Health care was the only industry that favored stock options over restricted stock, the study showed.
Fixed pay (retainers/fees) ranged from $42,800 (health care) at the low end to $65,000 (energy) at the high end. Variable pay (stock and stock options) had a much wider range of $15,000 (banking) at the low end to $113,250 (technology) at the high end.
In 2009 “we predicted that compensation would start to normalize this year, and it has,” said Derrick Neuhauser, chairman of the BDO global equity team and Midwest practice leader for the compensation and benefits practice. “The most highly compensated industries tend to favor equity grants in the form of restricted stock; however we also found slight increases in board retainer fees this year, as higher compensation becomes necessary to support the tremendous increase in risk and responsibility that board directors have taken on due to the financial crisis.”
While director compensation overall tended to increase as revenue size of the organization increased, the correlation was only slight. Companies were broken into three revenue categories: $25 million to $325 million, $325 million to $650 million, and $650 million to $1 billion. Average director compensation was $109,000 at companies in the smallest revenue category, just slightly lower at $108,580 in the middle category and $115,000 in the largest revenue category.
The BDO 600: 2010-2011 Survey of Board Compensation Practices of 600 Mid-Market Public Companies examined the director compensation practices of publicly traded companies with annual revenues from $25 million to $1 billion in the energy, health care, manufacturing, real estate, retail and technology industries as well as publicly traded companies with assets between $50 million and $2 billion in the banking and financial services (excluding banking) industries. The study examined proxy statements that were filed between Aug. 15, 2009, and Aug. 15, 2010.
Stephen Miller is an online editor/manager for SHRM.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Please sign in as a SHRM member before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
HR Education in a City Near You
SHRM’s HR Vendor Directory contains over 10,000 companies