EQUITY-ABLE – Stock Up, Pensions Decline in Director Compensation

August 29, 2000 (PLANSPONSOR.com) - Stock grants now make up more than half (55%) of outside directors' pay packages, up from 50% in 1998 according to a new study by William M. Mercer.

Nearly all (93%) of the 350 large US companies surveyed offer some type of stock arrangement, but only 4% pay 100% of the annual retainer in stock.

In 1996, stock grants comprised just 36% of the directors’ pay mix.

The study, drawn on information from current proxy reports, also found that increases in the value of stock grants lifted the median total direct compensation for directors nearly 8% over the past year, from $92,000 to $99,200.

In 1992, only 63% of companies provided some type of stock arrangement as part of the compensation offering.

The number of companies granting multiple types of stock awards has increased to 55% from 52% in 1998.

Multiple types could include some combination of restricted stock, unrestricted stock, and stock options.

Director pensions continue to decline in popularity, with just 11% of the surveyed companies offering retirement arrangements, down from 64% in 1994.

Most of the companies that eliminated director pensions either adopted a new director stock compensation plan or increased grants under an existing plan according to Mercer.

Of the companies in this year’s study:

  • 98% paid annual retainers to directors, with a median of $30,000
  • 54% paid annual retainers to committee chairs, with a median of $5,000
  • 78% paid board meeting fees to directors, with a median of $1,200 per meeting
  • 76% paid committee meeting fees to directors, with a median of $1,000 per meeting.

Median dollar amounts for retainers and fees did not change from 1998 to 1999.

The companies studied have median annual revenues of $5.9 billion, with an average of 11 members on their board of directors, including two employee and nine non-employee, or outside, members.

These boards held an average of eight board meetings in 1999.