November 16, 2011
Larger Equity Awards Push Director Pay Higher
– Theresa Tovar, Towers Watson
In last year’s report on director pay trends, we asked if compensation for corporate directors had found its floor following two consecutive years in which the economic environment prompted many companies to hold director pay levels in check. Pay for directors rose 3% in 2008 and just 1% in 2009. However, our latest annual review of director pay programs shows that, as with executive pay, director compensation rose in 2010 as the market and economy regained momentum.
Although last year’s growth in director pay levels was below the nearly 10% level of several years ago, the trend is once again upward. Our latest analysis of director compensation at Fortune 500 companies shows a moderate increase in year-over-year pay for directors in the largest U.S. companies, increasing 6% at the median during the past year. While most large companies continue to provide a roughly equal mix of cash and equity for directors, recent increases in pay components have been primarily concentrated on the stock side of the program, further strengthening the link between the interests of shareholders and directors.