Carrie Guenther
Christopher Power
Tyler Papineau
Meridian’s S&P 500 Outside Director Compensation Analysis offers insights into director compensation programs at the largest U.S. public corporations (with median revenue of $12.8 billion and median market cap of $28.5 billion). Data is based on the most recent proxy filings. The full insights can be downloaded by clicking on the “Download Insight as a PDF” on this page. Highlights of the analysis are outlined below:
• Total Compensation: Median average total director compensation was $311,307. However, there is a relatively narrow range of just over $50,000 between the 25th and 75th percentiles of director compensation.
• Pay Mix: Director compensation packages are weighted more toward equity than cash, with 60% of compensation delivered in the form of equity.
• Annual Equity Grants: Nearly all (98%) companies provide some type of annual equity award to outside directors. Typically, equity awards are granted using full-value shares as opposed to stock options.
― RSUs typically vest 1 year after the grant date.
• Timing of Equity Grants: 69% of companies grant equity on or around the annual meeting. A small minority (9%) of companies grant equity quarterly, while the remaining companies grant equity at other times.
• Board Meeting Fees: The use of board meeting fees has declined considerably over the last decade or more with only 8% of the S&P 500 providing per meeting fees to directors.
• Committee Meeting Fees: Committee meeting fees are similarly rare and have been replaced, in some cases, by committee retainers. Currently, 40% of companies pay a retainer for committee membership.
• Committee Chair Retainers: It is nearly universal (95%) for S&P 500 companies to pay incremental leadership fees to directors that Chair one of the three most common committees – Audit, Compensation and Nominating & Governance.
• Board Leadership Additional Pay: 90% of Lead Independent Directors and 94% of Non-Executive Chairs receive incremental leadership fees for board leadership roles. Median incremental compensation paid to lead directors is $40,000, while median incremental compensation paid to non-executive chairs is $170,000.
• Stock Ownership Guidelines: 96% of companies disclose stock ownership guidelines for outside directors, most often expressed as a multiple of the cash board retainer (typically 5×); the most typical time allotted for achievement is 5 years. The median value of stock ownership guidelines is $500,000.
• Holding Requirements: Of companies with stock ownership guidelines, 39% also require directors to hold a percentage of stock awarded with “hold until met” (i.e., hold until ownership requirement is met) as the most prevalent holding requirement.
• Board and Committee Composition: Median number of outside directors is nine, with four members typically serving on each of the Audit, Compensation and Nominating & Governance Committees.
• Gender Diversity: All boards include at least one female director on their board, with the median number of female directors being three.
This survey was co-authored by Christopher Power, Carrie Guenther and Tyler Papineau. Questions and comments should be directed to Mr. Power (cpower@meridiancp.com), Ms. Guenther (cguenther@meridiancp.com) or Mr. Papineau (tpapineau@meridiancp.com).