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Growth in stock-based awards drives increase; use of fixed retainers up
Total pay for outside directors at the largest U.S. corporations increased by 6 percent in 2013, fueled by higher stock-based compensation, according to a September 2014 analysis by Towers Watson.
The study found that cash compensation remained flat for the first time since 2007, when proxy disclosure rules were enacted requiring companies to report actual values received by directors in summary compensation tables.
Total compensation includes cash pay and annual or recurring stock awards.
According to the firm’s
annual analysis of director compensation at
Fortune 500 companies:
• Median total direct compensation for directors climbed 6 percent last year, to nearly $240,000, up from $227,000 in 2012. The increase was double the 3 percent increase in director total compensation in 2012.
• The median value of cash compensation remained flat last year at $100,000, while compensation from annual and recurring stock awards increased 4 percent, to $130,500, the largest increase since 2011.
• More than half (56 percent) of directors’ pay in 2013 was delivered through stock compensation, up slightly from 55 percent in 2012.
According to the analysis, the annual cash board retainer (or fixed fee, in contrast to per-meeting fees) remained flat in 2013 at $80,000, but the use of retainers for serving on a board committee has continued to increase.
Less than a quarter of companies (23 percent) now pay directors per-meeting fees for board meetings, while just 28 percent provide meeting fees for committee service.
Among other survey findings:
• Companies continued to deliver stock compensation to outside directors primarily through full-value share grants, with 84 percent granting a single type of full-value shares.
• Stock ownership guidelines and stock retention policies for directors have been adopted by most companies. In 2013, nine out of 10
Fortune 500 companies had either or both types of mandates. The median value of stock ownership required for directors subject to stock ownership guidelines increased from $350,000 in 2012 to $400,000 in 2013.
“The shift to retainers is likely to continue, as is the broader upward trajectory in director compensation,” said Todd Lippincott, North America leader of executive compensation consulting at Towers Watson, in a statement accompanying the report. “Companies will continue to monitor and evaluate their director pay programs closely as the demand for experienced and talented directors remains strong, and the time commitment and visibility of the role continues to grow.”
Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter
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