Director compensation rose in last year's disclosures, driven by incremental increases in stock awards and committee pay linked to growing workloads, according to a new report from Pearl Meyer and the National Association of Corporate Directors.
For boards and committees setting director pay, it's important to ensure alignment with stockholders and peers because outliers can catch negative attention from proxy advisors and other stakeholders. There's also a delicate balance between rewarding individual board members enough and paying too much, compensation professionals noted.
The median total direct compensation for board members reported in 2024 hit $242,094, up from $234,132 in 2023 disclosures. This includes retainers, meeting fees, stock awards, committee fees, and chair premiums. The pay elements that increased the most were stock awards, which grew 3% year over year, and committee compensation, which grew 5% year over year.
Boards don't typically provide major increases in pay unless it's to align with peer companies or due to other one-off situations and they tend not to want to lag or lead the market, sources said. However, given the scrutiny, risk, and liability associated with being a director, increases have been slower than some might expect, said Ryan Hourihan, managing director at Pearl Meyer. "I have a feeling that the pool of willing directors is going to start to decrease a bit," he said.
According to Hourihan, the largest overall pay package increases this year were at smaller companies to align with larger companies to attract director talent. Plus, as certain skill sets, such as AI and cybersecurity, become in demand for board members, this "could potentially create a need to start differentiating [more] in director compensation," Hourihan said.