2023 U.S. director pay trends

Director pay has reached new heights as companies refine their director pay programs in hopes of optimizing their ability to attract and retain effective board members. WTW’s Global Executive Compensation Analysis Team (GECAT) has concluded its annual S&P 500 director pay program analysis comparing year-over-year results between 2023 and 2022 proxy data. Overall total director compensation maintains its upward trajectory, buoyed by both cash and equity (see Figure 2 for key statistics for director pay program elements).

Specific key findings from the analysis include the following:

• Total direct compensation (TDC) rose 2% (from $300,000 to $305,000).
• The median annual cash retainer remains at $100,000. Board and committee meeting fee prevalence continues to whittle down, reaching 3% and 4%, respectively (each down one percentage point from the prior year). As was the case with annual retainers, the median value of most individual cash components remained the same as the prior year, with the exception of additional committee chair retainers, which leapt 14% (from $17,500 to $20,000). This helped push total cash compensation up 5% (from $110,000 to $115,000).
• The median value of annual equity grants increased 3% (from $180,000 to $185,000). Stock option prevalence (8%) and median value ($99,894) were unchanged from the prior year. The prevalence of common stock remained the same (14%), while deferred and phantom stock rose one percentage point to 18% and restricted stock dropped one percentage point to 67%. The median value rose 5% for common stock (from $166,258 to $175,000), 4% for deferred and phantom stock (from $170,000 to $177,002), and 3% for restricted stock (from $175,055 to $180,004). One-time initial stock grants decreased one percentage point to 8%, as the value at the median fell 10% from $200,000 to $180,912.
• Additional pay for the lead director remained $40,000 at the median, while non-executive chair of the board compensation once again outpaced TDC by increasing 5% at the median (from $165,000 to $172,543).

The year-over-year median pay mix remains constant at 39% cash and 61% equity, as nearly two-thirds of companies (62%) disclosed pay program changes in 2023 compared with 55% of companies reporting changes in the prior year. A little under half (42%) of companies increased the value of their annual equity grant, while more than a fourth (28%) increased their annual cash retainer. Only 14% of companies adjusted their non-core pay elements, such as leadership and committee pay. Following a drop during the 2020 pandemic period, pay program changes appear to be returning to a familiar rate.

Figure 1 provides an overview of the rate of change among pay program over the past three years.

With two years of significant leaps in the value of additional committee chair retainers (17% in 2022 and 14% in 2023), companies are increasing efforts to make sure committee leadership is adequately compensated. These changes seem to indicate acute interest in making sure that directors in leadership roles on the committees are paid for their expertise in roles with higher expectations of performance.

Authors

---

Rebecca (Becky) Burton

Senior Associate, Global Executive Compensation Analysis Team (Arlington)

email Email

---

Peter Kim

Senior Associate, Global Executive Compensation Analysis Team (Arlington)

email Email

---