For Directors, Pay Is Growing Modestly While Board Duties Get Heavier

Median public company director pay rose a modest 3% in 2025, according to the 27th annual Director Compensation Report produced by the National Association of Corporate Directors (NACD) and executive compensation advisory firm Pearl Meyer.

The report analyzed compensation and governance practices at 1,400 public companies across 24 industries. Companies were grouped into five size categories based on revenue: micro ($50 million to $500 million), small ($500 million to $1 billion), medium ($1 billion to $2.5 billion), large ($2.5 billion to $10 billion) and top 200 (the 200 largest companies in the S&P 500 by revenue). 

Additional research by executive compensation consulting firms backed up the report synopsis. Compensation Advisory Partners found a 3% increase in board-level pay after analyzing non-employee director compensation programs among the 100 largest U.S. public companies. And, FW Cook reported a 2.4% year-over-year trend in total director compensation.

“These stable outcomes are indicative of a corporate governance system that is fulfilling the fiduciary duty mandate that directors have to shareholders,” said Sarah King, NACD’s senior project manager.

Adapting Pay, Added Responsibilities

While director pay remains stable, the NACD report found organizations are continuing to move away from meeting fees and incremental committee membership fees, with more value consolidated into annual cash and equity retainers.

“That shift is not just cosmetic,” said Ryan Hourihan, a managing director at Pearl Meyer. “It reflects a deliberate effort to create flexibility in how directors are deployed across committees without compensation as a barrier.”

Additionally, organizations are navigating an environment of uncertainty defined by geopolitical tensions, economic volatility, rapid technological disruption, and increasing shareholder and public scrutiny, said Sue Holloway, a compensation content director at WorldatWork.

“All of this heightens the expectations placed on directors, expands their responsibilities, and raises the personal and reputational risks associated with board service,” she said.

According to Ani Huang, the president and CEO of the HR Policy Association’s Center on Executive Compensation, time commitments have increased substantially for board members due to these expanded duties.

“We may see some companies reassess whether pay is commensurate with expanded responsibilities,” she said, adding that organizations also are increasing committee chair premiums to reflect expanded workloads and enhanced disclosure requirements.

In fact, NACD’s report noted compensation committee chair pay rose 29% from 2020 to 2025 — the largest increase among board committees — compared with an 11% increase for other committee chairs. 

Despite these growing demands, Holloway said director compensation today tends to follow a fairly standard approach.

“Most organizations are rewarding directors with an annual cash retainer paired with a full-value equity award of corporate stock and then layering in an additional cash retainer for added responsibilities to those who serve as a committee chair,” she said. “In practice, the pay mix averages out to about one-third cash and two-thirds equity.”

Tenure Decline

Despite the modest pay increase for directors, NACD’s report showed median director tenure declined to 6.1 years, down from 8.7 years in 2015.

According to Hourihan, boards are placing greater emphasis on term limits in addition to retirement ages (typically set at 75 or older).

“I think 10 years will emerge as a practical benchmark for term limits,” he said. “That timeframe balances independence considerations — particularly proxy advisor scrutiny around long tenure — with the reality that recruiting high-quality directors can be a somewhat lengthy process in an increasingly narrow talent pool.”

Holloway added declining director tenure may be explained by the increased demands placed on directors, as well as organization refreshment strategies. 

“Many organizations proactively bring in new directors to ensure they have the right mix of skills, experience and perspectives needed,” she said. “This kind of refreshment supports stronger succession planning and ensures board continuity, while also avoiding situations where directors overstay their relevance.”

A Moving Market

Even as boards intensify their focus on leadership pipelines, HR and total rewards (TR) professionals should evaluate whether high-potential and next-in-line executives are being compensated competitively enough to retain and motivate them, said Hourihan.

“In that sense, the director compensation conversation reinforces a broader governance imperative: Talent strategy and pay strategy should move in lockstep,” he said.

For next steps, Holloway offered the following recommendations to organizations:

• Make sure pay structures match today’s realities. HR and TR teams should evaluate whether director pay structures adequately reflect the competitive landscape, governance demands and changing expectations and are effective in retaining and attracting the director talent their organization demands.
• Keep a close eye on market movement. Even though overall pay increases have been modest, it’s important to regularly benchmark pay against changes in the market, evolving director and shareholder expectations, and governance standards. 
• Communicate clearly. Directors should understand not just what they are being paid but why they are being compensated in that manner.
• Revisit board succession and refreshment. Review and adjust board succession strategies to address changes in organizational needs and any new or emerging director skills the board may lack.

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