Companies are adjusting board compensation to stay competitive and retain top directors, according to an analysis from advisory firm Willis Towers Watson.
Median direct pay hit $263,500 for directors of Fortune 500 companies in 2015, a modest increase over the prior year, according to the report. However, since 2014, median cash compensation grew 6 percent to more than $108,000 and stock compensation grew 3 percent to $150,000.
"Companies continue to adjust their director pay programs with an eye toward rewarding directors for their overall contributions rather than for how many meetings they attend," Robert Mustich, leader of Willis Towers Watson's Executive Compensation Consulting practice in the eastern U.S., said in a statement. "The fact that a third of the companies we analyzed changed one or more core elements of their pay program in the past year reflects an ongoing trend toward companies reviewing and adjusting their director pay packages on a regular basis to remain competitive."
Willis Towers Watson also noted fewer companies are using committee attendance fees — 18 percent in 2015 compared to 22 percent in 2014 — while more companies are using retainer-based pay for committee service — up to 27 percent from 25 percent. An increasing majority of companies also pay lead directors an additional fee (86 percent compared to 83 percent), and this bonus is growing. Lead directors earned $30,000 at the median in 2015, which marks a 20 percent increase over 2014.
However, recent court rulings have led to more limits on director-specific awards. Forty-two percent of companies have a cap on director-specific stock grants and half of these caps were added or changed in the past year, according to Willis Towers Watson.
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