‘Outside’ directors’ pay in US corporations reaches $250,000

‘Outside’, or non-executive, directors of US corporations saw their remuneration increase by 4% in 2014, driven primarily by rising stock values, according to a new analysis by Towers Watson. Median annual total pay for this board-level group reached a quarter of a million dollars for the first time in the history of the study, although the cash component remained flat at a median value of $100,000.

Paul Conley, US West division leader for executive compensation at Towers Watson, said:

‘For the second consecutive year, rising stock values were the driving force behind moderately larger increases in total pay for outside directors.’

The value of share-type compensation rose by a median 7% to almost $140,000, meaning that the typical mix of pay remained constant at 56% in equity and 44% in cash. The number of companies providing an annual retainer as the sole form of cash compensation for non-executive directors has steadily increased over the past few years, rising from 28% in 2010 to 37% last year.

Towers Watson analysed the compensation for outside directors at 470 publicly owned Fortune 500 companies that filed their fiscal year 2014 proxy statements by 30 June 2015. Data for these companies were then compared against the results of an analysis of 474 Fortune 500 companies for 2013.

Conley said:

‘Moderate annual increases in director compensation have become the norm. They afford companies more control over compensation. As demands and pressures on directors continue to rise, particularly through committee work and ongoing regulatory changes, we expect companies will continue to evaluate their director compensation programs in order to attract and retain the most qualified directors and ensure ongoing competitiveness.’
‘Equity-based pay continues to push increases in outside director pay’, Executive Compensation Bulletin, 27 August 2015, published by Towers Watson. To find out more visit: https://www.towerswatson.com/en/Press/2015/08/compensation-for-outside-us-corporate-directors-increased-4percent-in-2014