Willis Towers Watson's analysis of director compensation for 300 publicly-traded Fortune 500 companies based on proxy statements filed as of June 30, 2018 reveals these notable developments and year-over-year trends:
- Standard Pay
- Total direct compensation (cash + recurring equity awards) increased 3% to $267,500.
- Average pay mix remains constant at 43% cash/57% equity, with restricted stock being the most favored form of equity at 65%.
- Median annual cash compensation increased 4% to $107,500 - driven primarily by a 5% increase in the annual cash retainer to $100K.
- Median stock values increased 3% to approximately $150K.
- Board Leadership
- Virtually all companies with a non-executive board chair provide additional compensation (over the standard director pay) for that role. The median incremental compensation is $160K.
- 84% of companies with lead directors pay an additional fee for that role (up from 79% last year), with the median incremental compensation (most commonly cash) unchanged from last year at $30K.
- Compensation Limits
- Up from 55% last year, 61% of companies have established annual compensation limits. Of those, 32% (compared to 29% last year) include cash and/or total compensation - not just equity, as was the case historically.
- 78% of equity limits are based on a fixed dollar amount rather than a fixed number of shares.
- Share Ownership & Retention
- 94% of companies have director stock ownership guidelines and/or retention requirements. 84% of guidelines are based on a multiple (most commonly 5x) of the annual retainer.
- 55% of retention requirements impose a holding period until the stock ownership guidelines are met.
Also noteworthy: Just under half of companies review their non-employee director pay program at least annually, with that review most commonly conducted by the Compensation Committee (55%) or the Nom/Gov Committee (36%).