ARLINGTON, Va., July 19, 2016 (GLOBE NEWSWIRE) -- Total pay for outside directors at the nation’s largest corporations increased by a modest 3% in 2015, driven by increases in both cash and stock compensation, according to a new analysis by Willis Towers Watson (NASDAQ:WLTW), a leading global advisory, broking and solutions company. The study also found the annual cash retainer for board service reached $100,000 for the first time as companies continue to push toward a fixed approach to director pay.
According to Willis Towers Watson’s annual analysis of director compensation at Fortune 500 companies, median total direct compensation for directors climbed 3% last year, to $263,500, an increase from nearly $255,000 in 2014. Total compensation, which includes cash pay, and annual or recurring stock awards, had increased 4% the previous year. The median value of cash compensation increased 6% in 2015, to more than $108,000. Meanwhile, the value of stock compensation rose 3% at the median, to almost $150,000. The average mix of pay remained relatively constant at 57% in equity and 43% in cash.
“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,” said Robert Mustich, leader of Willis Towers Watson’s Executive Compensation Consulting practice in the eastern United States. “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.”
The annual cash retainer for board service increased 9% in 2015, rising to a record high of $100,000 at the median. About one-fifth of the companies (19%) increased their board retainer. The prevalence of variable elements of cash pay continued to shift in opposite directions. The use of committee attendance fees fell from 22% to 18%, while the use of flat, retainer-based pay for committee service increased from 25% to 27%. Additionally, the number of companies providing an annual board retainer as the sole form of cash compensation increased from 40% in 2014 to 42% last year.
“Given the growing demands and pressures being placed on directors, attracting and retaining qualified candidates to serve remains a challenge for many companies. As such, we expect companies will continue to evaluate the role of fixed and variable pay as well as cash versus stock compensation in their director pay programs and make appropriate adjustments as needed,” said Mustich.
Among other survey findings:
- Stock ownership and retention guidelines. Companies continue to embrace stock ownership guidelines and retention requirements for directors. Ninety-three percent of Fortune 500 companies now have one or both mandates in place. Eighty-one percent of ownership guidelines are based on a multiple of the annual retainer, with two-thirds of those set at a multiple of five.
- Limits on director-specific awards. Companies are imposing caps on directors’ potential stock grants in response to recent court rulings. More than four in 10 companies (42%) have a director-specific award limit in place, with half of these limits having been adopted or amended since 2015.
- Board leadership pay. Eighty-six percent of companies that have a lead director provided an additional fee for such service, up from 83% in 2015. The lead director fee increased 20% at the median to $30,000. Almost one in five companies with an existing lead director fee in place increased the fee this past year.
About the analysis
Willis Towers Watson analyzed the compensation for outside directors at 250 publicly owned Fortune 500 companies that filed their fiscal year 2015 proxy statements by June 30, 2016. Data for these companies were then compared against an analysis of the same 250 Fortune 500 companies for 2014.
About Willis Towers Watson
Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.
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Source:Willis Towers Watson Public Limited Company