Snapshot: Update on U.S. Director Pay

MAY 3, 2019

In recent years, non-executive director compensation has received attention in the U.S. Increased board workloads, shifts in director compensation structure (away from meeting fees and towards slightly larger base retainers, for instance), a few instances of shareholder litigation in relation to excessive director pay, and a few voluntary submissions of management proposals asking for shareholder approval of their non-employee director compensation programs have all contributed to the activity.

Upon review of current trends in director pay, we observe a reasonable increase in total director compensation, across all market segments, and we continue to see differentiation by industry group. Although director pay increases have outpaced rank-and-file employee increases (but sharply trail increases to CEO pay), outside evidence suggests that increasing commitment by directors to their oversight roles, along with increasing investor expectations and in some industries regulatory demands, justify the increases in compensation.

Equity remains a significant component in total director pay, with most directors receiving more than 60 percent of their compensation in stock. Not surprisingly, we observe a correlation between non-executive director pay and CEO pay, as both figures are largely determined by company size.

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