- Director compensation continues to increase. According to the National Association of Corporate Directors’ 2023-2024 Director Compensation Report, median pay for directors rose 4% in 2023, up from the previous year’s increase of 2%.
- Equity on the rise. The report found the percentage of companies delivering more than 50% of directors’ total pay in equity continues to rise.
- Growth in diversity. U.S. boards continue to make gains in gender diversity, with 53% of all boards now having three or more female directors.
Median pay for directors rose 4% in 2023 — up from the previous year’s increase of 2% — according to a new report from the National Association of Corporate Directors (NACD).
The 25th annual 2023-2024 Director Compensation Report, produced in collaboration with consultancy Pearl Meyer, was based on a robust analysis of director compensation trends and practices and nonemployee director compensation across 1,400 companies of various sizes and spanning 24 industries. Researchers drew from information found in proxy statements and other Securities and Exchange Commission filings.
The report assigns companies to one of five size categories based on revenue: micro ($50 million to $500 million in revenue), small ($500 million to $1 billion in revenue), medium ($1 billion to $2.5 billion in revenue), large ($2.5 billion to $10 billion in revenue) and top 200 (200 largest companies in the S&P 500, based on revenue).
The analysis primarily tracks year-over-year changes in director pay components, including cash retainers, equity grants and committee service compensation, according to Ryan Hourihan, managing director at Pearl Meyer and lead author of the report.
Directors are experiencing changes beyond those related to compensation, noted Hourihan. “While year-over-year changes in board pay have been modest, the scrutiny boards face continues to increase,” he said.
That means the compensation professionals helping to set directors’ pay rates will be under scrutiny, too. Here’s what they need to know.
Additional Data
The NACD findings fall in line with recent research from Compensation Advisory Partners (CAP), which found that median total board compensation increased 2.6% in 2023, driven primarily by increases in equity grant value.
The firm annually analyzes proxy disclosures to identify the pay levels and pay practice trends of nonemployee director compensation programs. It focuses on programs at the 100 largest U.S. public companies, which it has designated as “trendsetters” that can provide early insights into evolving pay practices across the broader public company marketplace.
Meanwhile, according to FW Cook’s 2023 Director Compensation Report, median pay for directors at small-cap companies increased by 1.9%, from $195,000 to $198,750, while pay at mid-cap companies increased by 6.6%, from $238,500 to $254,250, and pay at large-cap companies increased by 4.7%, from $300,000 to $314,000.
Increases at mid-cap and large-cap companies were “meaningfully” larger than in 2022 (1.1% and 2.0%, respectively), according to the report, likely reflecting the expanding responsibilities associated with board and committee service, the tight talent pool for qualified directors, and the general inflationary environment.
Gains in Diversity, Equity
The NACD report found the percentage of companies delivering more than 50% of directors’ total pay in equity continues to rise, with “micro” and “small” organizations providing the largest increases.
Directors earn their pay because they operate in a complex environment that has required enduring agility and adaptability, said Peter Gleason, NACD president and CEO.
“The complexity and time commitment associated with board membership have increased significantly,” he added, “due to monitoring and oversight in many areas such as human capital, technology, cybersecurity and AI, and economic concerns.”
Organizations have also made significant progress increasing gender equity in the boardroom, according to the NACD report.
“Gains in gender diversity on the nation’s boards continue, with 53 percent of all boards having three or more female directors,” Hourihan said.
The NACD report also found that companies are increasingly focused on board refreshment.
“There are signs that the prevalence of committee member retainers is decreasing, which can better support turnover at the committee level,” Hourihan said, “and mandatory retirement policies are far more prevalent than they were in previous decades.”
Overall, the NACD research points to a possible shift toward director pay programs that are simpler, he said.
“We are seeing fewer companies that use meeting fees, as well as signs that boards are opting for larger board retainers in lieu of committee compensation,” Hourihan said. “In doing this, boards are creating less pay differentiation among their directors.”
High Probability of Pay Increases
As long as inflationary measures continue to persist, there’s a high probability that director pay increases will continue as companies seek to remain competitive, according to experts.
Moreover, increased regulatory and shareholder scrutiny will require a larger time commitment from board members and create additional upward pressure on pay, said Hourihan.
“It’s important for boards to understand on an annual basis how they compare to market practice to ensure their programs are competitive and capable of attracting the caliber of director expected by shareholders,” he said.
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