Board member pay rises 3% at mid-market companies

04 November 2019 Consulting.us

An annual study from accounting and consulting firm BDO found that pay for board directors at mid-market companies increased 3% between 2017 and 2018. The survey examined 600 companies.

For the purposes of the study, BDO defines the middle market as being firms with between $100 million and $3 billion in annual revenues for non-financial services industries. Mid-market financial services firms, meanwhile, have assets between $100 million and $6 billion.

The study found compensation growth was down slightly from 2017, when average board member pay grew by 4% at mid-market companies.

Full value stock awards and board retainers and fees grew by 4% in 2018, while stock options and committee retainers and fees fell by 12% and 6% respectively.

Average board retainers and fees were $70, 925, average committee retainers and fees were $7,950, and average total equity pay was $91,435, for an average total compensation of $170,310.

“Companies are responding to pressures about board pay from investors and other stakeholders,” said Tom Ziemba, a managing director in the compensation consulting practice at BDO. “We’re starting to see a shift away from committee retainers and fees to help simplify board pay. Criticism of stock options have pushed more companies toward using performance-based pay; but it too has recently come under fire.”

Industry breakdown of board member compensation

There was some progress on the gender diversity front, with the amount of boards with at least one woman increasing from 82% in 2017 to 89% in 2018. Among smaller companies, the amount with at least one female board member increased from 70% to 80%.

Though energy firms still had the lowest levels of female representation on their boards, the proportion with at least one woman increased by 10 points to 73% in 2018.

Among the 600 companies surveyed, only 19% of the total board population was women. Only 7% had boards where women made up at a least one-third of the directors.

“Board member gender diversity has become a high priority as pressure escalates from shareholder activists, legislators, and regulators. While progress is coming slowly, I do expect we’ll see the picture shift even more dramatically in next year’s analysis,” said Amy Rojik, national assurance partner and director of BDO’s Center for Corporate Governance and Financial Reporting.

Healthcare board members had the highest average compensation ($233,331), rising 6% year-over-year. Technology industry board members were close behind at $230,621, with growth remaining flat. Banking industry board members continued to have the lowest average compensation at $48,669, though their compensation had the biggest jump (9%).

The BDO study found that board members of the largest companies continued to be paid the most and see the largest increases in pay, while pay at smaller firms remained flat.

The median total board fee paid among the 600 mid-market companies was $1.3 million, with board chairpersons typically paid 30% more than a regular director.


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