Director pay at S&P 500 and Russell 3000 companies continued to increase in 2020 filings. However, pandemic-related pay cuts and reduced appetite for increases going forward may spell the end of the current upward trend, at least for now. The findings were recently disclosed by the Conference Board in collaboration with Semler Brossy in the publication Director Compensation Practices 2021 Edition.
Some of the notable trends include:
- Boards, especially at smaller companies and in certain industries, continue to face challenges in the recruitment of diverse talent, often finding that increased pay or sign-on grants are necessary to secure in-demand individuals.
- In 2020, about 22% of Russell 3000 companies offered a sign-on equity grant to a director (compared to 12% of S&P 500 companies).
- This was even more pronounced in IT (38%) and healthcare (57%).
- Directors are busier than ever, with increased meetings and a substantial increase in responsibilities to include ESG, D&I, climate and culture. In particular the Compensation Committee is taking on the majority of this workload, but Nominating & Governance is also affected (median retainer for Nom/Gov Chairs grew from $15,000 to $20,000 this year).
- Median total compensation increased by 4.6% in the Russell 3000 and 1.8% in the S&P 500.
- Median equity compensation rose by 7.6% in the Russell and 2.4% in the S&P.
- Cash retainers and meeting fees were flat.
- Meeting fees are used a by a minority of companies – only 17% of Russell and 13% of S&P companies use them.
- More than a quarter (28%) of Russell 3000 companies and more than half of the S&P 500 have a combination of stock ownership guidelines and stock retention requirements, often until retirement/resignation from the board.
The article notes that the “pecking order” of committees seems likely to change, as Audit (which has traditionally been the highest paid) has taken on fewer additional responsibilities than Compensation and Nominating & Governance in the past two years. Additionally, we may see pay rise again at some point in the future if the increased workloads continue and directors continue to be expected to work more hours and attend more meetings than in the past.
