Average Board Director Pay Tops $250,000 In 2015

Average Board Director Pay Tops $250,000 In 2015

According to consulting and research firm Towers Watson, the compensation of board directors at U.S. public firms is steadily moving up. In fact, somewhat shockingly, a member of the board of directors at a major U.S. public firm will be compensated more than $250,000 on average in 2015.

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The Towers Watson Executive Compensation Bulletin for August 27th focuses on the compensation of board directors at Fortune 500 companies. Highlights of the TW director compensation survey include annual pay for outside directors moving up by 4% at the median, and the average total compensation moving past $250,000 for the first time. Also of note, 40% of companies changed one or more core elements of their director pay program this year, a modest increase from 38% that saw changes last year.

In undertaking the current survey, Towers Watson’s Executive Compensation Resources group examined director pay levels and practices in Fortune 500 companies that had filed proxies before June 30, 2015.

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More on TW 2015 director pay analysis

The TW director compensation survey also noted that the average mix of pay for directors remained constant year over year at 56% in equity and 44% in cash.

Of interest, median total cash pay was unchanged at $100,000 for the second consecutive year. That said, the annual board cash retainer was up by 13% at the median year over year. Larger retainers seem to correlate well with the continuing decrease in the use of cash per-meeting fees for board and committee service, and also explain why the cash comp percentage mentioned above is unchanged at 44%.

Director Pay

Annual stock compensation value for directors rose 7% at the median, almost twice the 4% rate seen in 2014. The TW survey highlights that full-value stock grants are still the most common method for giving equity compensation to directors. Over 96% of Fortune 500 companies now grant one or more types of full-value shares, similar to the 95% seen last year. In a notable change over time, today only 9% of companies issue stock option grants as part of their director pay package.

Director Pay

In another growing trend, a growing number of firms are putting caps on directors’ stock grants. Just over 27% of companies that adopted or amended stock plans that include directors as participants in the 2015 proxy season had an annual award limit for non-employee directors.

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