A number of factors are converging to fuel a rise in director compensation, including a grow in the demand for qualified directors at the same time that the qualified pool of candidates is shrinking (due to increasing requirements for expertise and restrictions on the number of directorships that individuals may hold). An article in Hay Group's recent 2007 (Volume 1) newsletter highlights changes in director compensation based on an analysis of 2006 proxy filings for S&P 500 companies. According to Hay's findings, the median value of director compensation among this group of companies increased 19% from 2005 filings (a figure, however, which does not account for changes in the sample or the effects of a bull market on equity pay).
Select details from Hay's findings regarding the different elements of Director compensation are summarized below. Note that the most significant changes are increases to the audit and compensation committee chair retainers.
- Annual retainer (cash & equity)
- Median annual value: $60,000
- Median percent change in value: 33%
- Meeting attendance fees - board meetings
- Median annual value: $1,625
- Median percent change in value: N/A
- Meeting attendance fees - audit committee
- Median annual value: $1,500
- Median percent change in value: N/A
- Meeting attendance fees - compensation committee
- Median annual value: $1,500
- Median percent change in value: N/A
- Equity compensation - stock options
- Median annual value: $93,200
- Median percent change in value: -5%
- Equity compensation - full value shares
- Median annual value: $80,000
- Median percent change in value: 28%
- Additional chair compensation (retainer) - nonemployee board chair
- Median annual value: $120,000
- Median percent change in value: 42%
- Additional chair compensation (retainer) - lead independent director
- Median annual value: $20,000
- Median percent change in value: 15%
- Additional chair compensation (retainer) - audit committee chair
- Median annual value: $15,000
- Median percent change in value: 75%
- Additional chair compensation (retainer) - compensation committee chair
- Median annual value: $10,000
- Median percent change in value: 100%
- Total director compensation (includes cash, equity plus meeting fees)
- Median annual value: $207,500
- Median percent change in value: 19%
Comments