Report: Changing Business Needs Will Drive Next Level of Innovation in Director Compensation
To help inform discussions on board director compensation structure and process, organizations can turn to a new report and online dashboard. Both products were developed by The Conference Board in collaboration with Semler Brossy and data analytics provider ESGAUGE.
Made available to the public, the online dashboard provides a comprehensive set of benchmarking data and analysis. It features the most recent corporate disclosure by Russell 3000 companies, including individual elements of compensation packages, supplemental compensations for committee service and leadership roles, stock ownership and retention policies, pay limits, and deferred compensation schemes.
HR Technology News: Terminal Named a Best Place to Work by Inc. Magazine
The data and insights come at a time when the responsibilities of corporate directors are changing radically in response to immediate business challenges and longer-term evolution in the balance between shareholder and stakeholder priorities. Board experience and activity must encompass a broader range of skill sets to help address these challenges. Companies will likely rethink some aspects of their director compensation policies to identify and compete for desirable candidates – including those from younger generations not currently serving on Boards – and to encourage continued professional development of existing directors.
Additional insights in the new report – driven by data curated from the dashboard – include:
Director compensation increases are likely post-pandemic. Board service and specific expertise at the committee level will drive these increases.
-
- Why: In recent years, board members have been tasked with more direct oversight responsibilities on a broader range of ESG and Human Capital Management (HCM) matters. In addition, the COVID-19 crisis will dominate board agendas of all companies in 2020 and demand an unprecedented level of time commitment. These trends may create new committees or expand charters of existing committees, drive changes in supplemental retainers for committee service, or even result in greater growth in base retainers for board service, given that all directors will face an increased workload that does not correspond to service on a particular committee. We expect this trend to evolve when the COVID-19 pandemic passes, given that many companies are currently temporarily reducing director compensation.
- What the data reveal: Board retainers typically increase by 4-5 percent annually, with pauses during times of crisis. Historically, audit committee service and leadership have demanded a pay premium relative to compensation and nominating/governance committees. For example, the most recent data show that audit committee members earn, at the median, an annual supplemental retainer of $10,000, compared to $7,500 for compensation committee members and $5,000 for nominating/governance committee members.