2015 Director Compensation Study

2015 Director Compensation Study

September 8 2015

2015 Study CoverSteven Hall & Partners recently completed its tenth annual study of compensation paid to non-employee directors.  This year we expanded our review beyond the traditional Top 200 to look at the differences in pay levels and practices among smaller companies.  The groups reviewed were as follows:

  • Top 200 – 200 companies with the largest revenues in fiscal 2014
  • Mid Cap – 200 companies included in the S&P MidCap 400®
  • Small Cap – 200 companies included in the S&P SmallCap 600®

Our review found that, in general, compensation is correlated with revenue size.  Larger companies pay higher levels of compensation with a larger percentage in the form of equity.  They are less likely to grant stock options or pay meeting fees.  Conversely, smaller companies pay lower levels of compensation, with a larger percentage in the form of cash.  These companies are more likely to grant stock options and pay meeting fees and unlike their larger counterparts, they are more likely to pay fees for service as a committee member, in part due to their increased use of meeting fees.

Among Top 200 companies, we found that 2014 total compensation for the average director increased +3.1% over 2013 levels, and +19.2% over 2009 levels.  Over the last five years, the compensation committee chair position has had the largest increase in total compensation (+19.6%) among the positions studied.  Although equity awards continue to increase as a percent of total compensation, stock options continue to decline in prevalence.  Finally, share ownership guidelines have become nearly universal among the Top 200 and are generally stipulated as a multiple of the annual board cash retainer.

Additionally we found that in 2014:

Total Compensation

  • Median total compensation paid to non-employee directors ranged from $142,313 at Small Cap companies to $276,667 at Top 200 companies
  • Information Technology, Energy and Health Care are the highest paying industries

Pay Mix

  • Equity as a percent of total compensation ranges from 49% among Small Cap companies to 57% among Top 200 companies

Share Ownership Guidelines

  • Guidelines were disclosed at 57% of Small Cap, 78% of Mid Cap and 94% of Top 200 companies
    • Generally disclosed as a multiple of annual cash retainer ranging from 3x to 5x the annual board cash retainer

Total Board Cost

  • Median total board cost ranged from $884,267 among Small Cap companies to $2,927,550 among Top 200 companies

PDF: Steven Hall and Partners 2015 Director Compensation Study