Board of Directors’ Pay Accelerates Upward Trend

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Board of Directors pay continues its upward movement according to a study published by Total Compensation Solutions (TCS). Overall Board compensation increases for the Chairman, Lead Director, and Regular Board Members were approximately 6.0 percent last year.

2015 / 2016 Board of Directors Compensation Report

Overall Board compensation increases for the Chairman, Lead Director, and Regular Board Members were approximately 6.0 percent last year.

Board of Directors pay continues its upward movement according to a study published by Total Compensation Solutions (TCS). Overall Board compensation increases for the Chairman, Lead Director, and Regular Board Members were approximately 6.0 percent last year. In the last annual survey, increases were in the 2 to 4 percent range

While many companies have turned in lackluster performance in the last six months, their Boards are still dealing with complex issues that will impact the company for years. Corporate transactions (mergers and acquisition) seem to be at the forefront of these issues. Board service today requires a greater time commitment and expertise from Board members and especially Committee members and this contributes to the upward trend TCS observes in Board Compensation.

The 2015/2016 Board of Directors Compensation Report reveals the compensation and governance practices of 498 companies. TCS compiled data on publicly traded companies in multiple industry groups (Banking, Biotechnology, Chemical, Consumer Goods, Energy, Financial, Healthcare, Insurance, Leisure, Media & Technology). The study reports on cash compensation as well as equity compensation. This includes: initial and continuing stock grants; board structure (number of directors and meetings); committee structure; and governance policies.

"There’s an emerging trend to review Board compensation as frequently as executive compensation," notes Paul Gavejian, Managing Director at TCS. "Board compensation used to be reviewed every three years like clockwork. Now everyone’s concerned about how much time their spending on complex Board issues and how much they’re getting compensated," he adds.

One Chairman commented: "the difference is that we pay Board members for their time as well as relevant skills, and we pay executives for their performance." "Good governance demands that we meet more often and spend more time deliberating on these issues. That means more pay for our dedicated Board members."

Tom Bailey, Project Director and author of the study noted several additional points including:

  •     About 43 percent of the companies in this study combine the role of Chairman and CEO in spite of guidelines from shareholder groups.
  •     The number of regular Board members has declined from 12 or 14 members several years ago to about 8 or 10 members now.
  •     The healthcare industry has the highest average total cash compensation for Chairman, Lead Director and Regular Board Members.

Copies of the 2015/2016 Board of Directors Compensation Report are available from TCS (http://www.total-comp.com). If you have questions regarding this report, please call TCS at (914) 730-7300 or email questions to: Tom Bailey tbailey(at)total-comp.com or Paul Gavejian pgavejian(at)total-comp.com.

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Total Compensation Solutions is an independent human resources consulting firm that assists clients in achieving their strategic compensation objectives. The firm uses market data to identify best practices in a variety of topical areas including: board compensation; executive, middle management and staff compensation; performance management; organization structure; health and welfare; and retirement benefits. From offices in Armonk, NY, TCS gathers and reports information on compensation, personnel practices and benefits and as a trusted advisor to management applies the most effective, market-driven solution to each organization’s unique set of circumstances. TCS provides comprehensive compensation consulting services to organizations in a variety of industries.

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Thomas Bailey
@totalcomp200
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