Total pay for outside directors at America’s largest corporations increased by a modest 2% in 2016, driven by increases in both cash and stock compensation, according to an analysis released on July 27 by London-based global advisory firm Willis Towers Watson….The Willis Towers Watson study also found that, of all pay elements in a director’s total package, the annual cash retainer for board service experienced the largest increase within the last year, bounding 6% in 2016. Specifically, the study found, median total direct compensation for directors climbed 2% last year, to $260,200—an increase from nearly $255,800 in 2015.
Total direct compensation includes cash pay and annual or recurring stock awards. According to the analysis, the median value of cash compensation increased 4% in 2016, to $105,000, while the median value of annual stock compensation rose 2% to $150,000. The average mix of pay remained relatively constant at 57% in equity and 43% in cash.
The study identified a number of other key findings. Among them:
Caps on director-specific awards. More than half (53%) of companies place a cap on annual stock grants to individual directors—and more than one-quarter (26%) have expanded the pay ceiling to comprise cash and/or total compensation. There has also been a substantial, 10-point shift toward basing limits on a fixed dollar amount (73%), up from 63% last year.
Board leadership pay. Nearly three-quarters (73%) of companies now look to lead directors as an alternative to having a chairman serve as the highest-ranking independent board member. Such lead directors received an extra $30,000 in compensation last year, up from $25,000 in 2015.Stock ownership and retention guidelines. Companies continue to maintain stock ownership guidelines and retention requirements for directors. Fully 93% of Fortune 500 companies now have one or both mandates in place. Most guidelines (82%) are based on a multiple of the annual retainer.