Hay Group's Director of
Compensation & Benefits survey reveals a more standard pay rate
for large US company directors
Fewer directors receive stock options, board meeting
fees
PHILADELPHIA, PA – August 14, 2012 - Hay Group – Director pay levels
were relatively consistent among top U.S. companies in 2011, regardless of
annual revenue, according to results from Hay
Group’s 2012 Director Compensation & Benefits Survey. For the
second year in a row, Hay Group examined compensation and benefits
packages for directors at the 300 largest companies that filed proxy
statements between May 1, 2011 and April 30, 2012.
Hay Group’s research found that among top U.S. companies both large and
small, median total direct compensation varied by only 21 percent in 2011,
despite dramatic differences in companies’ annual revenue. According to
the survey, in companies with revenues of more than $40 billion, median
director pay was $252,500 in 2011, compared to $209,000 for directors of
companies with revenues under $10 billion.
“As the accountabilities of public company governance have peaked, the
price of director talent has been set. There’s a minimum price to
compensate directors for their increased exposure and complexity in this
environment, independent of the size of the company,” said Irv Becker,
National Practice Leader of the U.S.
Executive Compensation Practice at Hay Group. “As pay levels become
less of a differentiator in attracting top board talent, it’s going to
become more critical for organizations to create and maintain positive
boardroom cultures with strong values.”
Compared to 2010, overall director pay levels increased only slightly
in 2011. For the largest U.S. public companies, median total direct
compensation for directors grew approximately 6 percent from $238,100 in
2010 to $252,500 in 2011. Similarly, pay for directors of public companies
with revenues under $10 billion grew approximately 5 percent from $200,000
in 2010 to $209,000 in 2011. Median direct compensation for all companies,
regardless of annual revenue, increased from $213,774 in 2010 to $227,250
in 2011.
Long-term incentive practices, on the other hand, saw a pronounced
change. Companies granting stock options decreased from 23 percent in 2010
to 17 percent in 2011, while companies granting restricted stock and
restricted stock units increased only slightly from 71 percent to 73
percent.
“Companies are continuing to remove risk and variation from their
director pay packages,” said David Wise, Senior Principal in the U.S.
Executive Compensation Practice at Hay Group. “Shareholders expect
directors to be focused on protecting shareholder value, and we’re seeing
a significant shift towards fixed compensation that is more likely to
promote balanced decision-making over the long haul.”
Other findings from Hay
Group’s 2012 Director Compensation & Benefits Survey include:
Companies continued to eliminate board meeting fees.
Organizations paying board meeting fees decreased from 35 percent in 2010
to 31 percent in 2011, while the median fee remained consistent at $2,000
year-over-year. Comparably, only 35 percent of companies paid meeting fees
for attending Audit or Compensation Committee meetings. The median fee for
the Audit Committee grew slightly to $2,000 in 2011 (compared to $1,500 in
2010), while the fee for Compensation Committee meetings remained at
$1,500.
Committee chairpersons were more likely to receive an annual
retainer fee. Of the companies surveyed, 94 percent paid Audit
Committee chairs a retainer fee for annual service, compared to only 39
percent that paid a retainer fee to Audit Committee members. For those
receiving a retainer fee, the median pay for serving as Audit Committee
chairperson in 2011 was $20,000 (the same as in 2010), while the median
retainer for serving as an Audit Committee member was $10,000 (also the
same as in 2010).
Annual retainer fees for board service increased slightly. The
percentage of companies that paid directors an annual retainer for board
service in the form of cash and/or equity in 2011 remained flat at
approximately 99 percent. The median annual retainer grew slightly from
$80,000 in 2010 to $85,000 in 2011.
Majority of directors received deferred compensation or at least one
type of benefit. Nearly all of the companies surveyed had some form of
deferred compensation arrangement or at least one type of director
benefit. Deferred compensation programs were offered by 60 percent of
companies and the most common form of benefits offered to directors were
matching gifts (offered by 43 percent of companies), followed by spouse
travel, accident/death insurance, and continuing education programs, which
were all offered by 16 percent of companies.
About Hay Group’s 2012 Director Compensation & Benefits
Survey
Hay
Group’s 2012 Director Compensation & Benefits Survey examined
compensation and benefits for directors of the 300 largest companies that
filed proxy statements between May 1, 2011 and April 30, 2012. Total
direct compensation was calculated using the assumption that a director
served as a member of the Audit Committee and a member of the Compensation
Committee. Additional information about the study can be found at http://bit.ly/PRGA7M. Media inquiries and
interview requests can be directed to Andrea Friedman at andrea@blisspr.com or at
212-584-5476.
About Hay Group’s Executive Compensation Practice
Hay Group’s
Executive Compensation Practice works with Compensation
Committees and Management at premier organizations across the globe to
create tailored solutions that help them meet their governance
responsibilities. For more than 60 years, we have helped companies of all
sizes and across all industries navigate their complex executive pay
issues to achieve desired outcomes and manage exposure. We understand the
evolution of compensation practices and help clients manage these changes
and prepare for scrutiny. For more information, please contact a
consultant in Hay Group’s Executive Compensation Practice at www.haygroup.com.
About Hay Group
Hay
Group is a global consulting firm that works with leaders to
transform strategy into reality. We develop talent, organize people to be
more effective, and motivate them to perform at their best. With 85
offices in 48 countries, we work with over 7,000 clients across the world.
Our clients are from the private, public, and not-for-profit sectors,
across every major industry and represent diverse business challenges. Our
focus is on making change happen and helping people and organizations
realize their potential.