Salary for corporate directors up by 4% last year

Total pay for directors outside the US increased by 4 per cent in 2014, according to a new analysis by Towers Watson, a human resources company.

The study found that median annual total pay for directors outside the United States reached the quarter-million-dollar mark for the first time in the history of the study, although cash compensation remained flat.

Additionally, two out of five companies made a change to one or more core elements of their director pay programme.

According to the annual analysis of director compensation at Fortune 500 companies, median total direct compensation for directors climbed 4 per cent last year, to $250,000 (Dh925,000), an increase from nearly $240,000 (Dh888,000) in 2013.

Total compensation includes cash pay, and annual or recurring stock awards.

The median value of cash compensation remained flat in 2014 at $100,000 (Dh370,000) for the second year in a row, while stock compensation value rose 7 per cent at the median, to almost $140,000 (Dh518,000), nearly double the 4 per cent increase in 2013.

The average mix of pay remained constant at 56 per cent in equity and 44 per cent in cash.

“For the second consecutive year, rising stock values were the driving force behind moderately larger increases in total pay for outside US directors,” said Paul Conley, US West division leader for Executive Compensation at Towers Watson.

“While many companies boosted the annual cash retainer for board service, total cash compensation remained flat, as fewer companies are paying directors on a per-meeting basis, a sign that companies continue to simplify their director pay programmes.

In short, companies are paying for directors’ overall contributions as opposed to paying for the time they devote to the role.”

The annual cash retainer for board service increased significantly (13 per cent) in 2014, rising from $80,000 (Dh296,000) to $90,000 (Dh333,000) at the median.

This marks the largest annual increase since before the financial crisis of 2009.

Over one-quarter of companies (26 per cent) increased their board retainer, up from 21 per cent of companies in 2013. The number of companies that provides an annual board retainer as the sole form of cash compensation has steadily increased over the last few years, rising from 28 per cent in 2010 to 37 per cent last year.

“Moderate annual increases in director compensation have become the norm. They afford companies more control over compensation. As demands and pressures on directors continue to rise, particularly through committee work and ongoing regulatory changes, we expect companies will continue to evaluate their director compensation programmes in order to attract and retain the most qualified directors and ensure ongoing competitiveness,” said Conley.

Companies continue to embrace stock ownership guidelines and retention requirements for directors. Ninety-one percent of companies now have one or both mandates in place.

Nearly four out of five (79 per cent) ownership guidelines are based on a multiple of the annual retainer, with the median multiple remaining at five times the annual retainer for the fifth year in a row.

Incremental pay for board leaders remained flat at the median compared with the prior year. The total compensation premium received by a lead or presiding director relative to that of a typical director remained the same at 11 per cent this year, while the pay growth among all directors has led to a drop in the non-executive board chair premium over the typical director, from 70 per cent to 64 per cent this year.

Towers Watson analyzed the compensation for directors outside US at 470 publicly owned Fortune 500 companies that filed their fiscal year 2014 proxy statements by June 30, 2015. Data for these companies were then compared against the results of an analysis of 474 Fortune 500 companies for 2013.

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