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 2025 proxy disclosures for these 100 companies.

The following page describes CAP’s key takeaways from 2025 proxy disclosures on Director Compensation programs, as well as our expectations looking ahead. Pages 3 through 6 provide more detailed findings.

CAP Detailed Findings

Board Compensation

• Total Fees: Median board compensation rose +3% year-over-year to $335K from $325K. Board compensation at the 25th percentile increased by +5% to $320K, while the 75th percentile saw a +3% increase to $358K.
• Pay Structure: On average, total pay was comprised of 64% equity and 36% cash, a slightly higher weighting on equity-based pay versus the prior year. This is consistent with a longer-term, gradual trend seen among large public companies, where total pay was comprised of 61% equity and 39% cash in our 2020 study, and 58% equity and 42% cash in our 2015 study. Typically, large US public companies solely use annual retainers to compensate directors, rather than through meeting fees or a mix of retainers and meeting fees. The simple of director pay structure (e.g., no meeting fees) is another long-term trend seen among large public companies. Only five companies in the sample still provide meeting fees – a decline from six last year, and from 11 in our 2020 study. Of the five companies that provide meeting fees, only three actually paid out any meeting fees in the past year, since the majority of these companies only do so when the number of meetings exceeds a pre-defined threshold. All three companies that paid out board meeting fees in the past year have non-standard ownership.
• Equity: Providing full-value equity awards (shares/units) remains the standard approach, with only one company granting stock options (no company uses stock options as the sole equity vehicle). Nearly all companies denominated equity awards using a fixed value rather than a fixed number of shares. Using fixed value is generally considered best practice as it manages the “target” value awarded each year.
• Form of Increase: 32% of companies disclosed increases to their annual cash or equity retainers, with most of the increases driven by changes to equity retainers:
  • 1% disclosed increases to only the board cash retainer
  • 11% disclosed increases to only the annual equity grant, with most companies making increases between $10K and $25K, with the median increase being $15K
  • 20% disclosed increases to both cash and equity retainers, with most companies making total increases between $15K and $31K, with the median increase being $24K

Committee Member¹ Compensation

• Overall Prevalence: 36% 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. Most companies rely on board-level compensation to recognize committee member (non-Chair) service, with the general expectation that all independent directors actively participate in committees.
• Total Fees: Of the companies that paid committee member compensation, the median for additional compensation remained flat for the Audit ($15K) and Compensation ($15K) Committees, while there was a modest decrease to $12K from $12.5K for Nominating/Governance Committee members.
• Meeting Fees: Similar to compensation for board service, meeting fees are uncommon for committee service. Only four companies in our sample provided committee meeting fees this past year (all four of these also provide board meeting fees). Per meeting fee values are consistent between each of a company’s committees, although the total fees paid differ due to different numbers of meetings between committees. This past year, Audit Committees had the highest median number of meetings at 9 per year, which is more than twice per quarter. Compensation Committees and Nominating & Governance Committees meet less frequently, at 6 and 5 times a year at median, respectively, or a little more than once per quarter.

Committee Chair² Compensation

• Overall Prevalence: 95% of companies in the study provided additional compensation to committee chairs, recognizing the additional time commitment, responsibilities and heightened shareholder scrutiny of governance.
• Total Fees: Median additional compensation for Chair service remained flat for each of the Audit ($30K) and Compensation ($25K) Chair roles. However, the additional retainer for Nominating/Governance Chairs increased to $25K from $20K for year-over-year. No committee chair from our sample receives additional committee meeting fees beyond what other committee members receive.

Independent Board Leader Compensation

• Non-Executive Chair: 86% of companies with this role provided additional compensation. Median additional compensation provided was $200K, consistent with the prior year. At median, when expressed as a multiple of total board compensation, total Non-Executive Chair pay was 1.61x that of a standard board member.
• Lead Director: 91% of companies with this role provided additional compensation. While median additional compensation remained flat year-over-year ($50K), CAP anticipates future increases based on the relatively narrow pay gap between the 25th percentile ($46.25K) to median, and the wide pay gap between median and the 75th percentile ($75K). At median, when expressed as a multiple of total board compensation, total Lead Director pay was 1.15x that of a standard board member. The pay differential relative to Non-Executive Chairs is in line with variation in roles and responsibilities.

Equity Retention

• Having a minimum stock ownership guideline in place is typical practice
• 91% of companies in our sample have a minimum stock ownership guideline in place for outside board members, consistent with the prior year. Among these companies, 89% use a “multiple of retainer” approach, the most common multiple being 5.0x the annual cash retainer, and the most common achievement period being within five years of election to the board.
• 38% of companies have a holding requirement in place where a pre-defined minimum percentage (net after-tax) of all vested equity awards must be held until a director achieves the minimum stock ownership guideline.
• It continues to be minority practice to require that equity awards be settled at or after termination of board service.

Pay Limits

• Director pay limits are in place largely due to the advancement of litigation over the past decade, over the conflict of interest stemming from directors approving their own compensation. As a general rule, directors who receive a substantial amount of their wealth through their pay as a director create a reputational risk for the company.
• 77% of companies have a shareholder approved limit in place for director compensation, slightly more than the prior year. Limits apply to total director pay (62% prevalence for those who have limits in place) or equity awards, only (38% prevalence). Similar to last year, limits typically range from $600K to $1M with a median of $800K, which is 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) represent 64% of total annual board pay, on average.

• Companies do not typically change, or review, director compensation limits on an annual basis. They typically review pay limits about every three to five years when they look for shareholder approval for a new or amended equity incentive plan/reserve. During the last year, four companies in our sample added pay limits, and three companies made changes to their pre-existing limits over the past year:
  • Bank of America, HCA Healthcare, Performance Food Group Company, and Exxon Mobil added new limits this past year.
  • Chubb increased their equity and cash limit across all directors from $5.5M to $6.5M, using a consistent percentage increase to what was approved for the annual pay program.
  • Centene and Walmart changed their limit from covering equity only to now cover both equity and cash. Centene changed their limit from two million shares to a limit of $1M in cash or equity, while Walmart changed their limit from five hundred thousand shares to a limit of $2M in cash or equity.

Board Size & Number of Board Meetings

• Both Board size and number of board meetings have remained constant despite evolving responsibilities of corporate boards (e.g., artificial intelligence, cybersecurity, environmental/social issues, etc.).
• The median number of non-employee directors for our sample has consistently been at 10 over the past decade, while the median number of board meetings has remained at 7 since 2022 (consistently around 8 for years prior to that).

Historical 3-Year Look at Pay Levels

Average Total Board Compensation ($000s)³

Additional Leadership Compensation ($000s)

Research assistance for this CAPIntel was provided by: Thomas Brown, Grace Tan, Cedrick Jean-Louis, and Alex Barrionuevo.

Introduction

Board members at privately held and family-owned companies play an important role in governance and oversight and should be appropriately compensated for their contributions and efforts. However, the appropriate amount of compensation is difficult to determine because of the lack of available market data on private company board pay. To address this data deficiency, Compensation Advisory Partners (CAP) and Private Company Director and Family Business magazines conduct our annual survey of private company board compensation and governance.

The new 2025 sixth edition of the survey report covers a robust dataset of 633 respondents that certified their data in April 2025 and provides an up-to-date analysis of director pay practices that reflects the current competitive environment. New questions about family and owners’ councils were added to the 2025 survey to capture the additional governance forums specific to family businesses. Year-over-year comparisons are made in this report with respect to the 2024 survey results.

For the purpose of analyzing the compensation data elements, only companies that provide the compensation element were included. Some companies that do not offer a particular compensation element provided “zero” as the answer for that pay element. Zeros were omitted in the analysis of pay levels for components of pay. However, companies not offering a particular compensation element are reflected in the prevalence data. The effective date for the data is April 2025.

Summary Report

The full report for the 2025 Private Company Board Compensation and Governance Survey with detailed results is provided to survey participants only. This executive summary report covers high-level findings. Please contact CAP to participate in the 2026 edition of the survey to access the full results with data by revenue size, industry and company type, or if you are interested in a compensation assessment based on the survey data.

About the Survey Participants

The survey respondents represent companies in diverse industries and span a variety of sizes as measured by revenue. Exhibit 1 shows the distribution of responses across revenue ranges. The average revenue across the entire survey sample is $138 million. However, the large number of respondents means that we have robust data samples across all revenue ranges.

The top three industries represented in the survey are manufacturing (26% prevalence), professional, scientific and technical services (16%), and finance and insurance (11%).

Of the participating companies, 50 percent are wholly or majority family-owned or controlled. The survey also drew participation from companies that are closely held, private equity-owned, and owned by employees through employee stock ownership plans (ESOPs). The business structures represented include S corporations, C corporations, limited liability companies (LLCs), partnerships, and other structures (see Exhibit 2).

Most participants are based in the United States, but the survey drew responses from all over the world. Of the respondents, 74 percent have fiduciary boards, while the remainder have advisory boards. Compensation for directors on advisory boards is typically 65 percent to 75 percent of the compensation for directors on fiduciary boards, given less risk and legal obligations with advisory boards.

Compensation Components

As private company board governance continues to evolve, the complexity and time commitment associated with board service has increased because of a broader mandate of work being expected of board members. The additional responsibilities, coupled with greater competition to recruit qualified candidates and an inflationary economic environment, resulted in a 25 percent increase in median total compensation per director from 2024.

Table 1 summarizes board compensation levels for the total sample if the participant reported data for that element.

Table 1

Median Private Company Board Compensation Levels (Total Sample)

Notes: Data reflect the median of all companies reporting data for each pay component. Median figures are not additive because of the varying prevalence of each pay component.

Total compensation includes annual board cash retainer, meeting fees (board and committee), leadership premiums, committee leadership and membership retainers, and long-term incentives for non-employee directors.

The double-digit increase in total director compensation from 2024 to 2025 can be attributed to the following factors:

• Increased prevalence of annual board retainers (77% vs. 75% in 2024) and the corresponding reduction in per-meeting fees (38% vs. 45% in 2024). Companies are consolidating meeting fees into a single annual retainer.
• Increased prevalence of long-term incentives across the entire survey sample (37% vs. 28% in 2024). This is a trend that CAP has been predicting, and we are finally seeing evidence of it in the data set.
• Increased workload for directors. The number of directors working more than 100 hours per year increased by 18 percent in 2025.

Annual Retainer

Of survey respondents, 90 percent provide some form of compensation to directors. Annual board service cash retainers are the most prevalent component, paid by 77 percent of respondents. In addition, more than half of companies (54%) now use annual retainers as their only form of cash compensation. Board retainers are highly correlated with company size as shown in Exhibit 3.

Meeting Fees

Meeting fees continue to be used by private companies – particularly family businesses – but are declining in prevalence. Of the private companies surveyed, 15 percent use meeting fees as their only form of cash compensation. As with retainers, meeting fees increase with company size (see Exhibit 4).

Long-Term Incentives

The prevalence of long-term incentives (LTI) for private company board service increased significantly, with 37 percent of respondents now offering LTI to directors. LTI use is growing in prevalence as private companies compete with public companies for director talent, and over 90 percent of public companies grant equity to directors.

Of the private companies offering LTI to directors, stock options and restricted stock/units (“real equity”) are the favored vehicles. Several respondents reported the use of cash bonuses tied to annual performance metrics, which CAP has classified as LTI in the survey. Typical practices for private company LTI awards are to grant either annually (54%) or when the director is appointed to the board (44%), and to have awards subject to vesting. Given the multiple time frames that awards cover, LTI grant values vary significantly. The total sample median award value is $50,000, which is a combination of the grant date value of annual, ad hoc, periodic, and one-time/front-loaded grants.

The use of LTI indicates that private companies are working to retain and align board members with the company’s overall success. CAP expects the use of performance-based pay for directors to continue to increase over time, especially at larger private companies, because of competition for specialized board talent with public companies.

Other Key Pay Practices

Compensation to Family Members

Of the participants, 47% provide compensation to shareholders and family members who serve on the board. The decision to compensate shareholders and family members is a philosophical one; for some companies, the rationale for not paying directors is due to such directors already benefitting from the company through shareholder distributions or employment. Other companies believe in the importance of recognizing contributions, skills, and time for all directors, regardless of family or shareholder status. For these companies that compensate shareholders and family members, more than 70 percent compensate them on the same basis as the independent directors.

Board Leadership Retainer

Approximately 40 percent of private companies provide additional compensation for board leadership roles. When the incremental leadership retainers are considered as a multiple of regular board member retainers, the median multiple is 0.64x for the incremental board chair retainer, a level that has remained stable over time. The median multiple is 0.42x for the incremental lead director retainer.

Committee Retainers

About 40 percent of private companies provide additional compensation for committee chairs with an incremental retainer of $6,000 at median. Most companies do not differentiate pay between types of committees.

Committees have become more prevalent at privately held companies, with 68% of survey respondents reporting they have formal committees. The three main committees reported are Audit and Compensation (both with 86% of respondents), and Nominating/Governance (67%). Typically, each director serves on one or two committees as a requirement of board service.

Summary of Board Pay Models

As shown in Table 2, private companies use different pay models to compensate directors. The annual cash retainer only model (either with or without LTI awards) is gaining in popularity (54% of respondents), as it is simple to administer and is similar to the approach used by publicly traded companies.

Governance Findings

In addition to benchmarking compensation levels and practices, the survey covers governance issues, including board size and composition, independence, workload, term limits and diversity.

Board Size and Composition

Typical private company board size ranges from five to eight directors, with a median of seven directors. The median size is unchanged from the 2024 survey.

Board composition for 2025 continues to be half inside directors and half independent/outside directors.

Number of Board Meetings and Workload

For 2025, private company boards report holding an average of four in-person meetings and two virtual meetings, which is unchanged from 2024. The reported annual time commitment to perform the basic board duties has increased in 2025. One-third of respondents spend 51 to 100 hours on board work each year, with another 21 percent spending more than 100 hours on board work. Committee work typically adds an additional 10 to 20 hours to annual board work.

Board Chair

Many companies separate the board chair and chief executive officer (CEO) roles: Of the private company survey respondents, 31 percent have a board chair who is an outside director, and 30 percent have a lead independent director, compared with 51 percent and 37 percent, respectively, for micro-cap public companies. Corporate governance best practices call for increased use of independent board leadership.

Board Diversity

Two-thirds of the survey respondents indicate that diversity is somewhat to extremely important for their board composition. Exhibit 5 shows the reported importance of board diversity compared to previous iterations of this survey. Private companies often recruit board members for particular knowledge or experience, or to fulfill specific company needs. As a result, gender and ethnic diversity have not had the same level of focus for board recruitment as at publicly traded counterparts.

Privately held companies increased representation by women and minority directors in the past year. The 2025 survey found that 76 percent of private company boards have female directors, and 32 percent have Black, Asian, Latino or multiracial directors. As shown in Exhibit 6, women remain underrepresented in board leadership roles. However, women in leadership roles have increased since 2024.

Other governance findings are limited to survey participants.

Board Effectiveness

Privately held companies create boards to provide a structure of accountability and sound governance, and because boards provide benefits and competitive advantages. Directors bring specialized skills and expertise to the company, serve as sounding boards and advisors to owners and management, provide unique perspectives and ideas, and leverage their professional networks on behalf of the company. At times, directors also assist with transactions and special situations.

The survey asked respondents about the effectiveness of their boards. As shown in Exhibit 7, respondents overwhelmingly reported that their boards are effective, with 87 percent rating them as effective to extremely effective.

The survey asked respondents about ways to improve board effectiveness and the board’s biggest impact on the company. The top two ways to enhance board effectiveness are to add board members with specific expertise (e.g., industry, operations, finance, etc.) and to increase interactions between management and the board. The biggest impacts of private company boards are serving as a sounding board for management, especially on developing business strategy, and providing enhanced corporate governance for the company.

Family and Owners Councils

The 2025 survey gathered data for family and owners councils for the first time, to better capture the scope of governance forums at family companies. Family (or owners) councils are the primary forum for communication and education of the family for the purpose of sustaining engagement in the business.

Among family business respondents to the survey, 46 percent reported having a formal structure for family governance. Of companies with a family council, 23 percent pay the leader and 20 percent pay members. Thirty-six percent of family councils have an established budget. We expect family governance responses to be more robust in future survey iterations.

Looking Ahead

Private companies have really “upped their game” in director compensation and corporate governance practices this year. As the evolution of private company governance continues, CAP expects further change given the ongoing tight talent market where both public and private companies are competing for the same group of qualified director candidates. The overlap in the market for talent is causing pressure on private companies to increase pay levels and to be more creative in their pay structures to support their recruitment efforts. Once privately held and family-owned companies attract directors who have the right skills and cultural fit required by the company, they want to reward and retain them with properly structured director compensation packages.

CAP expects to see an increased emphasis on performance-based pay in the form of annual bonuses or long-term incentives (either real stock or cash-based) to align board compensation with shareholder interests and company performance over a director’s tenure. We also expect continued increases in overall compensation, including annual retainers and average pay per director, given the greater time commitment and expectations placed on board members. Like public companies, private companies are expected to shift to the annual retainer model and diminish the use of meeting fees, which create an administrative burden. Bundling pay for all board activities in the form of an annual cash retainer is a simpler way to compensate overall time and effort and is easier to administer. Further, not all board work is done in formal meetings, so retainers better reflect the ongoing interactions between the board and company management.

Survey Contacts

The full survey results are free but limited to participants. Please contact either CAP or the survey director if you are interested in participating in the 2026 survey, and contact CAP if you are interested in a compensation assessment based on the survey data.

Survey Director

David Shaw Publishing Director of Directors & Boards and Private Company Director [email protected]

Survey Authors from Compensation Advisory Partners

Susan Schroeder Partner [email protected]

Bonnie Schindler Partner [email protected]

Louisa Heywood Associate [email protected]

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

• 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.

A question we get as board advisors is: do non-executive Board Chairs and Lead Directors typically serve on board committees, and if they do serve on a board committee, or committees, is it typically as a member or as the Chair of the Committee? We analyzed practices among the 100 largest U.S. public companies, by revenue, to address this and related questions, with a focus on the three standard board committees: Audit, Compensation and Nominating/Governance.

Do non-executive Board Chairs and/or Lead Directors serve on board committees?

Among our sample, a majority of both non-executive Board Chairs and Lead Directors serve on board committees. 69% of non-executive Board Chairs serve on at least one board committee, compared to 83% of Lead Directors. Most commonly, both roles serve on one or two of the standard board committees, and on average non-executive Board Chairs serve on 1.1 board committees compared to 1.4 committees for Lead Directors. In our experience, directors serving in either of these leadership roles at times will attend committee meetings even if they are not a formal/voting member of a given board committee.

Which board committees do non-executive Board Chairs and Lead Directors serve on?

Among the non-executive Board Chairs that serve on at least one committee, they most often serve on the Nominating/Governance Committee (59%), followed by the Compensation Committee (33%), with more limited prevalence of serving on the Audit Committee (13%).

At a high level, prevalence is directionally consistent for Lead Directors, Nominating/Governance Committee has the highest prevalence (57%), Compensation Committee has the second highest prevalence (48%), and Audit Committee has the lowest prevalence (32%) among Lead Directors that serve on at least one board committee. While directionally similar in terms of prevalence, Lead Directors are more than twice as likely (32%) to serve on an Audit Committee as a non-executive Board Chair (13%). This is likely driven by the independence standards that exist for Audit Committee members on public company boards.

When non-executive Board Chairs or Lead Directors serve on a board committee, how often do they Chair that board committee?

Among non-executive Board Chairs that serve on at least one committee, when they are on an Audit Committee they serve in the Chair role 20% of the time, when they are on a Compensation Committee they serve in the Chair role 31% of the time, and when they are on a Nominating/Governance Committee they serve in the Chair role 35% of the time.

In contrast, among Lead Directors that serve on at least one committee, none in our sample served as the Chair of the Audit Committee. Serving as the Chair of the Compensation Committee is also less common for Lead Directors compared to non-executive Chairs, with the Lead Directors in our sample serving in the Chair role only 17% of the time. The Nominating/Governance Committee has the inverse relationship, where Lead Directors serve as the Chair in the majority of instances (56%) which is significantly higher than their non-executive Chair counterparts.

Conclusion

This information has compensation-related implications. For example, a question that periodically comes up during director compensation reviews, is for instances where the Lead Director also serves as the Chair of the Nominating/Governance Committee, is if the Lead Director should receive additional compensation for both roles, or just for the Lead Director role? Answering such questions in a data-based manner, in terms of both pay data and other relevant market/prevalence data, is best practice. Detailed information on pay levels and trends can be found in CAP’s annual CAPintel on non-employee director compensation here:

https://www.capartners.com/cap-thinking/director-compensation-increases-are-back-among-the-largest-us-companies/