Overall pay for non-employee directors rises as stock options fall and retainers increase, Hay Group study shows
Retainer fees of directors of large public US companies rose 6.3 percent in 2011 and the number of offering stock options waned as growing accountability prompted corporations to shift emphasis to fixed pay, according to a study by global consulting firm Hay Group.
Retainer fees rose to a median of $85,000 a year in 2011 from $80,000 in 2010, according to the Hay Group study of the 300 largest companies filing proxy statements between May, 2011 and April, 2012.
The study found that 99.3 percent of the companies paid a retainer fee in 2011, roughly the same as in 2010.
At the same time, the number of companies offering stock options as long-term incentives declined to 17 percent of the total from 23 percent, the study showed.
The number of companies offering directors restricted stock rose slightly, to 73 per cent from 71 percent.
Overall, pay for directors of companies with annual revenue of more than $40 bn rose to an average of $252,500 a year last year, from $238,100 in 2010. Pay for directors of companies with less than $10 bn in annual revenue increased 5 percent over the same period, up to $209,000 from $200,000.
‘As accountability of non-executive directors continues to grow, Hay Group expects to see pay levels continuing to increase at material rates every few years,’ according to the study.
‘More companies will continue to simplify and stabilize director pay levels by continuing to eliminate board and committee meeting fees in favor of enhanced board or committee retainers and by moving away from stock options to full-value type vehicles.’
The Hay Group study also found that director pay levels varied little between companies, even among those with large differences in annual revenue, with total direct compensation differing by only 21 percent between the largest and smallest of the companies.
Companies also continued a trend in 2011 of eliminating board meeting fees, with only 31 percent of companies paying such fees in 2011, compared with 35 percent the previous year. The median board meeting fee was steady, at $2,000.
‘Companies are continuing to remove risk and variation from their director pay packages,’ David Wise, senior principal in Hay Group’s US executive compensation practice, said in a press release.
‘Shareholders expect directors to be focused on protecting shareholder value, and we’re seeing a significant shift toward fixed compensation that is more likely to promote balanced decision-making over the long haul.’
