Each year CAP analyzes non-employee director compensation programs among the 100 largest US public companies. These companies are trendsetters and can provide early insights into evolving pay practices across the broader public company marketplace. This report reflects a summary of pay levels and pay practice trends based on the most recent 2024 proxy disclosures.

Key Takeaways

• Median total board compensation was flat year-over-year ($325K)
• Similarly, compensation provided for service in board and committee leadership roles was also flat versus prior year at median
• Meeting fees and use of stock options continue to be uncommon, with only 6% of companies paying board meeting fees and only 2% granting stock options to their directors

Looking Ahead

• During the next year, we expect a modest increase to median pay levels for standard board service
• We also expect to see continued focus on the additional retainers provided to Lead Directors and Committee Chairs

CAP Findings

Board Compensation

• Total Fees. Median board compensation was $325K, which was flat year-over-year. At both the 25th and 75th percentiles, board compensation increased +2%, to $305K and $348K, respectively
• Pay Structure. Companies rely mainly on annual retainers (cash and equity) to compensate directors. Pay programs for large companies are simple and tend to not use meeting fees. Only 6% of the companies in our sample continue to have meeting fees. Almost half of these companies only pay meeting fees when the number of meetings exceed a certain threshold. We support this approach as it simplifies administration and the need to define what counts as a meeting, though it may not be appropriate in all situations. All three companies that do provide board meeting fees have non-standard ownership
• Equity. Consistent with prior years, providing full-value equity awards (shares/units) is the standard, with only two companies providing stock options (one of these companies grants both stock options and RSUs). Almost all companies denominated equity awards using a fixed value, not a fixed number of shares. Using fixed value is generally considered best practice as it manages the “target” value awarded each year. This is consistent with practices observed in other recent years
• Pay Mix. On average, total pay was comprised of 63% equity and 37% cash
• Form of Increase: 18% of companies disclosed increases to their annual cash or equity retainers:
  • 1% disclosed increases to only board cash retainer
  • 8% disclosed increases to only annual equity grant
  • 9% disclosed increases to both cash and equity retainers

Committee Member Compensation¹

• Overall Prevalence. 35% of companies paid committee-specific member fees for Audit Committee service, while only about a quarter of companies paid fees for service as a member on other committees. Companies rely more on board-level compensation to recognize committee member (non-Chair) service, with the general expectation that all independent directors actively contribute to committees
• Total Fees. Of the companies that paid committee member compensation, the median for additional compensation remained flat for the Audit ($15K), Compensation ($15K) and Nominating/Governance ($12.5K) Committees

Committee Chair Compensation²

• Overall Prevalence. 95% of companies in the study provided additional compensation to committee Chairs to recognize additional time requirements, responsibilities and shareholder scrutiny of governance
• Fees. Similar to committee member compensation, median additional compensation for Chair service was flat year-over-year for each of the Audit ($30K), Compensation ($25K) and Nominating/Governance ($20K) Chair roles

Committee Meetings

• Audit Committees are meeting more than two times per quarter
• At median, Audit Committees met the most with 9 meetings, while Compensation Committees met 6 times and Nominating & Governance Committees meeting 5 times

Independent Board Leader Compensation

• Non-Exec Chair. Additional compensation was provided by 90% of companies with this role. Median additional compensation provided for service in this role was $200K, which was consistent with prior year. As a multiple of total Board Compensation, total Board Chair pay was 1.67x that of a standard Board member, at median
• Lead Director. Additional compensation was provided by 88% of companies with this role2. Median additional compensation was flat versus prior year, though we do anticipate increases in the future. At the 25th and 75th percentiles, additional pay provided for this role increased +3% and +5%, respectively. Median additional compensation provided for this role is approximately 67% greater than that provided for the Audit Committee Chair role. As a multiple of total Board Compensation, total Lead Director pay was 1.15x that provided to a standard Board member, at median. The difference in pay versus Board Chairs is in line with typical differences in responsibilities

Pay Limits

• 75 percent of companies have a shareholder approved limit in place for director compensation, consistent with prior year. Prevalence of limits that apply to both cash and equity-based compensation (i.e., total director pay) is slight majority practice
• Director pay limits are in place largely due to advancement of litigation where the issue has been that directors approve their own annual compensation and are therefore deemed to be inherently conflicted
• Similar to last year, limits typically range from $600K to $1M, with a median approximately $800K
• The limits are generally much higher than annual equity grants and/or total annual compensation. For example, roughly one-third of limits are equivalent to more than 5x the annual equity grants, which (as mentioned above) represents 63% of total annual board pay, on average

Limit Multiple Range	Prevalence
< = 3x annual equity	32%
3.01x – 5x annual equity	35%
5.01x – 7x annual equity	16%
> 7x annual equity	17%

• Companies do not typically change, or review, director compensation limits on an annual basis. They typically review these limits about every three to five years when they look for shareholder approval for a new or amended equity incentive plan/reserve. Only two companies in our sample made changes to their limits over the past year:
  • Caterpillar increased their equity & cash limit to $1.0M (from $750K)
  • MetLife changed their limit to now cover both equity & cash, from equity only, and reduced the limit to $1.0M (from $2.0M)
• Some companies exclude initial at-election equity awards, committee Chair pay, and/or additional pay for Board leadership roles from the limit, but such a practice is the exception not the norm
• The higher limits above are intended to address situations like having to pay higher amounts to a non-executive Chair. In terms of potential perceived conflict of interest when it comes to setting pay for a non-executive Chair, the incumbent can be recused from discussions and the vote on their own pay

Equity Retention

• 90% of companies in our sample have a minimum stock ownership guideline in place for outside board members, consistent with prior year. Among these companies, 87% use a “multiple of retainer” approach (e.g., 5.0x the annual cash retainer must be achieved within five years)
• Nearly 40% of companies have a holding requirement where (net-after tax) a portion or all of vested equity awards must be held until a director achieves the minimum stock ownership guideline
• It is minority practice to require for equity awards to be settled at or after termination of board service

Some Changes CAP Suggests Companies Consider

• Communication and Education: Not all companies get this aspect of effective compensation programs right. Oftentimes, distributing a simple summary (or “cheat sheet”) of the director pay program to participants can be an effective tool that limits misunderstandings, help prompt questions, and support consistent understanding of the program, philosophy and rationale behind the program
• Recruiting New Directors. As boards look to refresh and diversify their membership, this may be the time to re-visit initial at-election equity awards for new directors. At-election grants can be a way to differentiate your company’s pay program in the recruiting process without a more costly increase to standard director pay levels and more quickly “ramp” the ownership position of new board members
• Board Leadership Roles. Taking on the role of non-executive Chair, Lead Director or Chair of a major Board committee can come with considerable additional time requirements, responsibilities, and reputational risk, yet additional compensation provided for most of these roles only reflects a modest premium on the standard director pay program. Providing greater additional compensation for the role of Lead Director of Chair of a major Board committee should be considered, to better align with the typical time requirements, responsibilities and reputational risk individuals in these roles take on
• Stock Ownership Requirements. Especially among the largest companies, it is common practice to require settlement of equity-based pay be deferred until a director leaves the board. We support alignment of director and shareholder interests through equity compensation, but allowing access to some equity-based compensation while an active director in combination with a standard stock ownership guideline (e.g., multiple of annual cash retainer) may be a competitive advantage when recruiting new directors who may be more focused on current compensation

Historical 3-Year Look

Research Assistance: Zaina Jabri, Kasey Landon, and Abigail Bucklin provided support in preparing this CAPintel.

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1 Audit, Compensation and/or Nominating and Governance committees.

2 Excludes controlled companies. Also excludes instances where Lead Director role is assumed by Chair of Nominating and Governance Committee, who receives compensation for the role.

3 Total Board Compensation reflects all cash and equity compensation for Board and committee service, excluding compensation for leadership roles such as Committee Chair, Lead/Presiding Director, or non-executive Board Chair.