The Towers Watson annual analysis of director compensation at Fortune 500 companies found that 2009 pay packages for directors climbed just 1% over 2008 levels – smaller than the median increase of 3% directors received in 2008. Prior to the economic crisis, directors had been steadily receiving annual pay increases of nearly 10%, according to a press release.
Total compensation for the outside directors at the companies studied increased to $200,698 last year, up slightly from a median value of $199,949 in 2008 – marking the first time that median total compensation, which factors in the annualized value of one-time equity grants some directors receive when joining the board, has surpassed the $200,000 threshold. Cash compensation increased by 1% (from $83,875 in 2008 to $85,000 last year), while the value of equity awards also increased by 1%, to $104,939 from $103,963 the previous year.
The analysis also found that more companies eliminated board and committee meeting fees, and replaced them with fixed retainers for serving on boards and committees. The percentage of companies paying board meeting fees declined from 44% in 2008 to 40% last year. There was also a decline in companies paying committee meeting fees – from 48% in 2008 to 45% in 2009.
The value of compensation previously provided as meeting fees was replaced with corresponding increases to board and committee retainers. Most companies continued to move toward a relatively even mix of cash and equity in their programs, Towers Watson said.
Other survey findings included:
- Nearly four in 10 (38%) companies operate with a separate chair and CEO, up slightly from the previous year. At the median, non-executive board chairs received an additional $150,000 in incremental pay above and beyond that provided for regular board service, bringing their median total pay package to approximately $347,000 in 2009.
- Audit committee members received larger retainers ($10,000 median value in 2009) versus those who serve on compensation committees ($7,500 median value) or governance/nominating committees ($6,000 median value). The higher fees are to compensate directors for added time requirements and responsibilities associated with the enactment of the Sarbanes-Oxley Act.
Towers Watson analyzed the compensation for outside directors at 469 publicly owned Fortune 500 companies that filed their fiscal-year 2009 proxy by June 30, 2010, and compared that data against the results obtained from an analysis of 461 Fortune 500 companies in 2009.A report is here.