Total compensation paid to all non-employee members of the Board of Directors grew +2.9% in 2020, to $2.6 million. The findings are based on Steven Hall & Partners’ recent study of 100 companies with revenues greater than $1 billion that filed proxies on or after January 1, 2021.
The board compensation rose at 58 companies and declined at 42 companies. Year-over-year changes in both cash compensation and the value of equity compensation contributed as the primary drivers of either growth or decline in total board compensation when compared to 2019 levels.
Among the 100 early filers, one-year changes in total board compensation ranged from
-36.1% to +124.3% and the median change equaled +2.9%. The -36.1% decrease was due to voluntary reductions in equity compensation in recognition of the impacts of the COVID-19 pandemic. The +124.3% increase was due to the introduction of equity compensation into the director compensation program.
Total Board Compensation By Industry
Among industries for which the sample was five or greater companies, median total board compensation ranged from $1.9 million at Industrial companies to $2.9 million at Health Care companies. The median for all companies reviewed was $2.6 million. Health Care companies showed the largest one-year growth in total board compensation (+5.4%) while Consumer Discretionary companies had the most significant decline (-2.8%).
Pay Mix
The majority of compensation delivered to directors in 2020 was delivered via equity awards (57%), followed by cash payments (42%), and all other compensation (2%). All other compensation includes items such as charitable contributions, dividend equivalent payments and other perquisites granted to directors.
Number of Paid Directors
Early proxy filers had between five and 18 paid directors on the board in 2020. The median equaled 10. In 2020, 34 of the 100 early filers expanded the number of paid directors on the board by one to three new directors, while 26 companies reduced the number of paid directors by up to three fewer directors. There was no change in the number of paid directors at 40 companies.
For companies at which the total board compensation decreased in 2020, the median number of paid directors remained consistent with 2019 at 10 directors. For companies at which the total board compensation increased in 2020, the median number of paid directors increased slightly, going up to 10 directors in 2020 from 9 directors in 2019. This change partially accounts for the observed increases in total board compensation among those companies, however, the primary driving factors were increases to cash and equity compensation amounts paid.
About the Study
The study analyzed compensation data for the most recent two years as disclosed in 100 proxy statements filed in 2021 for companies with revenues greater than $1 billion. For additional details regarding the study please contact Steven Hall Jr. at 212-488-5400 or sehall@shallpartners.com.