Director Pay Increases Modestly in 2005

August 8, 2006 ( - A recent study from Mercer Human Resource Consulting found that compared to previous years, director pay increased modestly in 2005.

In a press release, Mercer said its study of the proxy statements of 350 large publicly traded US organizations revealed that median total direct compensation (pay for board and committee service, and equity grants) for board members increased 6.1% in 2005 to $164,637 – a sharp contrast to the 17.8% jump in overall director pay between 2003 and 2004.

Mercer’s study found that fewer directors received stock option grants (53% in 2005 versus 59% in 2004 and 66% in 2003), while more directors (63% in 2005 versus 58% in 2004) received full-value equity awards, such as restricted stock, according to the release. Total median long-term grant value grew 5.9% in 2005, compared to a 30.7% increase between 2003 and 2004.

Board and committee meeting fees remained constant at $1,500, and the number of companies that paid board meeting fees dropped slightly to 214 in 2005 from 224 in 2004.

A change in pay for audit and compensation committee chairs reflects responsibility changes incited by the Sarbanes Oxley Act, Mercer said in the press release. Among the companies that reported pay levels for these positions, 73% pay the audit committee chair a premium over what they pay other committee chairs and around 23% of the compensation committee chairs receive a premium.

The study found that company size and industry affect the level of director pay. Directors at companies with median annual revenues of $3.1 billion received median total direct compensation of $139,651 in 2005, while companies with median annual revenues of $20.2 billion paid their directors $187,348. Director pay was highest for computer/office equipment firms, with a median total direct compensation of $261,704. Director pay was lowest for directors at forest/paper products companies, who took in a median of $124,000.