Director pay has reached new heights as companies refine their director pay programs in hopes of optimizing their ability to attract and retain effective board members. WTW’s Global Executive Compensation Analysis Team (GECAT) has concluded its annual S&P 500 director pay program analysis comparing year-over-year results between 2023 and 2022 proxy data. Overall total director compensation maintains its upward trajectory, buoyed by both cash and equity (see Figure 2 for key statistics for director pay program elements).
Specific key findings from the analysis include the following:
The year-over-year median pay mix remains constant at 39% cash and 61% equity, as nearly two-thirds of companies (62%) disclosed pay program changes in 2023 compared with 55% of companies reporting changes in the prior year. A little under half (42%) of companies increased the value of their annual equity grant, while more than a fourth (28%) increased their annual cash retainer. Only 14% of companies adjusted their non-core pay elements, such as leadership and committee pay. Following a drop during the 2020 pandemic period, pay program changes appear to be returning to a familiar rate.
Figure 1 provides an overview of the rate of change among pay program over the past three years.
2021 | 2022 | 2023 | |
---|---|---|---|
Annual equity grant | 18% | 34% | 42% |
Annual cash retainer | 13% | 23% | 28% |
Non-core pay elements | 31% | 41% | 46% |
Any change | 39% | 55% | 62% |
With two years of significant leaps in the value of additional committee chair retainers (17% in 2022 and 14% in 2023), companies are increasing efforts to make sure committee leadership is adequately compensated. These changes seem to indicate acute interest in making sure that directors in leadership roles on the committees are paid for their expertise in roles with higher expectations of performance.
2022 | 2023 | % change | Prevalence | |
---|---|---|---|---|
Revenue ($ millions) | $11,141 | $12,682 | 14% | |
CASH | ||||
Board cash retainer | $100,000 | $100,000 | 0% | 97% |
Board meeting fee | $2,000 | $2,000 | 0% | 3% |
Committee cash retainer | $10,000 | $10,000 | 0% | 36% |
Committee meeting fee | $1,500 | $1,500 | 0% | 4% |
Committee chair extra retainer | $17,500 | $20,000 | 14% | 94% |
Annual cash compensation | $110,000 | $115,000 | 5% | 97% |
ANNUAL/RECURRING STOCK | ||||
Expected value | ||||
Common stock ($) | $166,258 | $175,000 | 5% | 14% |
Stock options ($) | $99,955 | $99,894 | 0% | 8% |
Deferred stock and phantom stock ($) | $170,000 | $177,002 | 4% | 18% |
Restricted stock ($) | $175,055 | $180,004 | 3% | 67% |
Annual/Recurring stock compensation ($) | $180,000 | $185,026 | 3% | 99% |
Total direct compensation | $300,000 | $305,000 | 2% | 100% |
ONE-TIME STOCK | $200,000 | $180,192 | - 10% | 8% |
One-time stock grants annualized | $25,000 | $22,614 | - 10% | 8% |
Total compensation (with one-time stock) | $302,222 | $308,284 | 2% | 100% |
Title | File Type | File Size |
---|---|---|
WTW 2023 U.S. director pay trends: An analysis of director pay programs at S&P 500 companies - Dec 2023 | 4.8 MB |