Director pay levels at S&P 500 companies

As companies pursue and retain non-executive directors to serve on their boards, they must ensure the pay programs offered to these individuals remain attractive in an ever-increasing competitive talent pool. WTW’s Global Executive Compensation Analysis Team (GECAT) completed its annual year-over-year comparison of S&P 500 director pay program results, tracking differences between 2021 and 2020 proxy data. The latest review of non-employee director compensation shows an increase in total direct compensation driven by changes to both cash and equity compensation.

Specific key findings include:

• The median value of most individual cash components remained the same, while the median value of total annual cash compensation increased from $107,500 to $110,000 (2%). The median value of annual stock compensation increased 3%. Overall, total direct compensation went up just 1%, a similar increase to the prior year.
• Pay mix for non-employee board members remained divided 60% in equity and 40% in cash.
• The prevalence of board meeting fees declined by one percentage point, while the prevalence of committee per-meeting fees declined by two percentage points. The median value of committee per-meeting fees increased from $1,500 to $2,000 (33%), putting it in line with the median board meeting fees value.
• Equity compensation continues to be the most prominent part of the director pay package. The number of companies granting common stock decreased one percentage point (to 14%), while the number of companies granting restricted stock increased one percentage point (to 67%). The median value of stock options increased 3% for stock options (from $86,424 to $89,167), deferred and phantom stock (from $160,000 to $165,047), and restricted stock (from $165,000 to $170,043).
• One-time initial stock grant prevalence increased one percentage point, as value at the median increased 9% from $156,000 to $170,000.

Just under two-fifths of companies (39%) reported making pay program changes in 2021 compared with 55% of companies reporting changes in the prior year. Nearly one-fifth of companies (18%) increased their annual equity grant, 13% of companies increased their annual cash retainer, and 15% of companies adjusted their non-core pay elements. Though the COVID-19 global crisis continues, a better understanding of its impact may lead to an amount of pay program changes that are more in-line with prior years.

Authors

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Rebecca (Becky) Burton

Senior Associate, Global Executive Compensation Analysis Team (Arlington)

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Don Delves

Managing Director, Executive Compensation and Board Advisory

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Peter Kim

Senior Associate, Global Executive Compensation Analysis Team (Arlington)

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