Compensation for U.S. Corporate Directors Increased 6%, Towers Watson 2014 Analysis Finds
September 24 2014 - 8:05AM
Business Wire
Increase in stock-based portion offset no change to cash
portion of total pay package
Total pay for outside directors at the nation’s largest
corporations increased by 6% in 2013, fueled by higher stock-based
compensation, according to a new analysis by global professional
services company Towers Watson (NYSE, NASDAQ: TW). The study also
found that cash compensation remained flat for the first time since
2007, when proxy disclosure rules were enacted requiring companies
to report actual values received by directors in summary
compensation tables.
According to Towers Watson’s annual analysis of director
compensation at Fortune 500 companies, median total direct
compensation for directors climbed 6% last year, to nearly
$240,000, up from $227,000 in 2012. The increase is double the 3%
increase in director total compensation in 2012. Total compensation
includes cash pay, and annual or recurring stock awards. The
analysis found that the median value of cash compensation remained
flat last year at $100,000, while compensation from annual and
recurring stock awards increased 4%, to $130,500, the largest
increase since 2011. More than half (56%) of directors’ pay in 2013
was delivered through stock compensation, up slightly from 55% in
2012.
“The increase in stock compensation was clearly the driving
force behind the increase in total pay for directors last year.
This is a change from the previous year, when cash compensation
increases were the driver,” said Todd Lippincott, North America
leader of Executive Compensation consulting at Towers Watson.
“While the proportion of pay delivered to directors in cash
remained flat, companies continued to shift how they deliver pay to
directors. In fact, the prevalence of paying fees for board and
committee meeting attendance dropped at a faster rate than in
previous years, while the use of retainers to compensate committee
members continued to rise.”
According to the analysis, the annual cash board retainer
remained flat in 2013, at $80,000. Less than a quarter of companies
(23%) now pay directors per-meeting fees for board meetings, while
just 28% provide meeting fees for committee service. Conversely,
the use of committee retainers has continued to increase.
“The shift to fixed retainers is likely to continue, as is the
broader upward trajectory in director compensation. Companies will
continue to monitor and evaluate their director pay programs
closely as the demand for experienced and talented directors
remains strong, and the time commitment and visibility of the role
continues to grow,” said Lippincott.
Among other survey findings:
- Companies continued to deliver stock
compensation to outside directors primarily through full-value
share grants, with 84% granting a single type of full-value
shares.
- Stock ownership guidelines and stock
retention policies for directors have been adopted by most
companies. In 2013, nine out of 10 Fortune 500 companies had either
or both types of mandates. The median value of stock ownership
required for directors subject to stock ownership guidelines
increased from $350,000 in 2012 to $400,000 in 2013.
About the Analysis
Towers Watson analyzed the compensation for outside directors at
474 publicly owned Fortune 500 companies that filed their fiscal
year 2013 proxy statements by June 30, 2014. Data for these
companies were then compared against the results of an analysis of
469 Fortune 500 companies in 2012.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global
professional services company that helps organizations improve
performance through effective people, risk and financial
management. The company offers consulting, technology and solutions
in the areas of benefits, talent management, rewards, and risk and
capital management. Towers Watson has more than 14,000 associates
around the world and is located on the web at towerswatson.com.
Towers WatsonEd Emerman, +1
609-275-5162eemerman@eaglepr.comorBinoli Savani, +1
703-258-7648binoli.savani@towerswatson.com
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