Director Compensation Report
The State of Director Compensation
Compensation of nonemployee directors is a critical element in the overall governance of any company. Well-designed compensation not only helps to align the interests of shareholders and directors but also provides value to directors for value received. The 2019–2020 Director Compensation Report, produced in collaboration with Pearl Meyer, offers insights into compensation trends and changes based on data from 1,400 public companies in 24 industries.
Cash Retainers Increased More Than Stock Awards
Cash retainers for all firms grew 6 percent, while stock awards grew only 4 percent year-over-year. Annual board cash retainers continue to be the most prevalent element of board compensation, with virtually all companies (97%) providing an annual cash retainer to directors with 93 percent of companies granting equity.
Board Leadership Pay Increases
Nonexecutive chairs saw a 7 percent increase in total director compensation from 2018 to 2019, while lead directors saw a 3.8 percent increase. Overall board compensation increased just 2 percent year over year.
One-year Vesting Period Remains Prevalent
Fifty-three percent of companies that grant full-value shares use a one-year cliff vesting term, while 43 percent of stock options vest after one year.
About NACD's Director Compensation Report
NACD works with Pearl Meyer annually to report on nonemployee director compensation. Together, we analyze proxy statements, US Securities and Exchange Commission filings, and other data to deliver insights into the state of board compensation for public companies from a wide range of industries. A related publication, the Director Compensation: Summary Statistics, is available from Pearl Meyer and provides additional data on director compensation by industry and company size. For further information or compensation consultation, please contact Jannice Koors, managing director at Pearl Meyer, by emailing firstname.lastname@example.org.