NEW YORK--(BUSINESS WIRE)--Median total remuneration paid to non-employee directors was $268,333 in 2013, an increase of +2.7% over 2012 levels. Results are based on a study of the top 200 public U.S. companies, ranked by revenue, recently completed by executive compensation consultancy Steven Hall & Partners. These relatively modest increases are in-line with annual merit increases for rank and file employees at most companies.
While pay levels have not changed markedly over the past year, public scrutiny of director pay has. ISS, a prominent shareholder advisory firm, has recently incorporated an assessment of director pay relative to comparators into its influential governance rating methodology. And it’s not just director pay garnering increased focus from outside observers. A range of governance-related items, including concerns about director tenure compromising director independence, long an area of focus in Europe; size of the board; and the proportion of women on the board, are also coming under increased scrutiny.
“Directors should be mindful of the increased attention paid to their compensation and related governance issues,” said Steven Hall Jr., a Consultant at Steven Hall & Partners. “While we believe a thorough review of pay levels and governance practices makes sense, we also urge caution. We believe that companies are best served by making thoughtful decisions in the best interests of long-term shareholders, rather than blindly chasing the latest ‘best practices’.
“This increased scrutiny on director issues generally, and director compensation in particular, is likely one of the moderating influences on director pay increases among this group. Additionally, we have observed an increased homogeneity among director compensation programs, as companies seek to avoid the spotlight on these issues,” Mr. Hall continued.
A summary of study results is provided below. The complete study will be published in September.
Pay Mix
Pay mix for non-employee directors has remained relatively unchanged since 2008. Directors continue to receive just over half of their total compensation in the form of equity (55% in 2013), in accordance with governance best practices.
Annual Board Retainers
Annual cash board retainer increased $5,000 in 2013 to a median of $90,000 and the median annual equity board retainer remained constant at $140,000.
Equity compensation is delivered predominantly in full value shares. Only 9% of the Top 200 grant stock options, the lowest level observed since the inception of the Steven Hall & Partners study in 2005. Equity vesting periods remain unchanged from 2012, with over 80% of awards vesting either immediately or within one year of the grant date.
Committee Fees (Retainers plus Meeting Fees)
Committee chairs for each of the Audit, Compensation and Nominating/Governance committees receive additional fees at 98%, 96% and 94% of the companies studied, respectively. Median committee chair fees equaled $25,000, $20,000 and $15,000 for the Audit, Compensation and Nominating/Governance committees, respectively.
Members of the Audit, Compensation and Nominating/Governance committees receive additional fees at 60%, 45% and 41% of the companies studied, respectively. Median committee member fees equaled $15,000, $10,000 and $10,000 for the Audit, Compensation and Nominating/Governance committees, respectively.
Share Ownership Guidelines
Share ownership guidelines continue to rise in prevalence, with 90% of companies disclosing the existence of such guidelines in 2013, up from 74% of companies five years ago. Among those companies with guidelines, 73% are valued at a multiple of five times or greater the cash retainer.
About the Study
In September 2014, Steven Hall & Partners will release its full report on 2013 non-employee director compensation. The study will include an analysis of overall compensation levels (in the aggregate and by pay element), total board cost as well as an in-depth examination of trends in director compensation and related governance matters over the last five years. To receive a printed copy of the study, please contact Steven Hall Jr. at 212-488-5400 or sehall@shallpartners.com.
About Steven Hall & Partners
Steven Hall & Partners is an independent executive compensation consulting firm serving as outside counsel to Boards, Compensation Committees and management. The firm focuses solely on executive compensation, director remuneration and related corporate governance matters. For more information, please visit www.shallpartners.com and follow us on Twitter @SHallPartners.
