PHOTO:CHRISTOPHER LEE/BLOOMBERG NEWS
Compensation for directors of large U.S. companies continues to creep upward, with half paying a typical board member $300,000 or more last year, a new study finds.
Median pay for the non-management directors of 100 of the largest U.S. companies rose 3.4% from $290,000 in 2016, according to the study from pay consultancy Compensation Advisory Partners in New York.
Median director pay for a similar group of companies was $257,000 in 2012 and $225,000 in 2008. Directors also working as corporate executives are omitted from the analyses.
Companies in the CAP analysis are increasingly limiting director compensation, but not necessarily in meaningful ways. The change comes in response to challenges from shareholders, said Dan Laddin, founding partner of CAP. “The view was that directors had paid themselves too much, and because directors get to decide their own pay, there’s an inherent conflict of interest.”
However, the limits are often significantly above existing pay levels. About half the companies limited pay to between $500,000 and $1 million, and most set limits at least triple what they currently pay in equity grants, CAP found.
Pay has risen as corporate boards face tougher obligations and increased risk of litigation and regulatory inquiry, according to pay and corporate-governance consultants.
“The responsibility and scrutiny directors are under has just increased dramatically,” Mr. Laddin said.
Some companies pay considerably more than the median. Board members at Goldman Sachs GroupInc. made a base $575,000 in cash and stock last year, plus $25,000 for committee chairmen, though the company reported paying some directors more than $600,000. The figure was $510,000 at OracleCorp. , where four directors made more than $600,000, and $425,000 at Google parent AlphabetInc.
A Goldman spokeswoman said that directors’ pay can appear over $600,000 if they change the proportion they choose to take in cash or stock from one year to the next, because of Securities and Exchange Commission reporting requirements.
Spokeswomen for Oracle and Alphabet said the companies and boards declined to comment.
A Wall Street Journal analysis in 2016 found that median director pay at most S&P 500 companies was between about $230,000 and $295,000—with some companies paying a director as much as $1.77 million. Several of those companies continue to pay well above the norm. Last year, Regeneron PharmaceuticalsInc. paid all but two of its 10 non-management directors at least $1.3 million, mostly in stock options.
Other large companies pay directors much less. Berkshire HathawayInc., for example, paid its 10 nonmanagement directors between $2,700 and $6,700 last year—$900 for attending a meeting, or $300 for phoning in, plus $1,000 a quarter for audit-committee members. Most Amazon.comInc. directors received no compensation from the company in 2017, although the board does periodically grant directors shares: Two were granted awards of nearly $900,000 last year.
Other features of director compensation haven’t changed much. Most pay annual stipends rather than per-meeting fees. Equity makes up about 60% of pay overall—primarily restricted stock rather than options—with the rest paid in cash.
Directors who head key committees tended to receive additional fees, with a median of $15,000 to $25,000, depending on the committee. The median additional amount received by lead directors remained about $35,000, while the median additional fee paid to non-executive chairmen was about $233,000.