Daily Management Review

Directors’ Compensated In US Companies Higher Than Ever, Says New Report


Directors’ Compensated In US Companies Higher Than Ever, Says New Report
According to a new report released by executive headhunters Spencer Stuart, for the first time last year, the $300,000 mark for the average annual compensation for non-executive directors at S&P 500 companies was passed with an average compensation of $304,856 which was 2 per cent higher year on year as well as 43 per cent more than the average compensation ten years ago.
However, some of them earned much more than that amount mostly because of stock grants.
Last year, an average compensation of $1.2 million was awarded to the directors at biotechnology company Regeneron Pharmaceuticals Inc. According to the company disclosures, more than $6 million received by Regeneron’s independent chairman was not included in that figure. 
In 2018, an annual average of $599,279 was given as compensation to the non-executive directors of Wall Street powerhouse Goldman Sachs Group Inc which is the highest for any financial company in the S&P. However that figure was lower than the 2017 figure that was at $604,837 annually. No comments were made except for the disclosures made in its proxy statement by the investment bank which had held 13 board meetings last year.
During 2018, the boards of the S&P 500 companies met either person or via telephone 7.9 times on an average. According to Spencer Stuart, the figure was lower than the average number of meetings of 9 that was done by the same companies about a decade ago.
These large compensations are being handed out at a time when there is pressure on Corporate America. One of the election promises this time for one of the top contender for the Democratic presidential nomination for the 2020 election, Elizabeth Warren, is bringing in equality in the American society and she wants to start with company boards. Warren has also proposed that at least 40 per cent of the board members should be elected by the employees of the US corporate ion addition to proposing measures to imposing wealth tax aimed at billionaires. No comment was made by the campaign team of Warren.
The issue of compensation of directors is also being criticized nowadays be investors. Their compensation is typically decided by the company boards themselves. The big-ticket board compensation packages are being increasingly challenged through lawsuits by a growing number of shareholders.
Paul Hodgson, a compensation expert and senior adviser at ESGuage, a corporate governance data and analysis firm, said that such reaction from investors about directors’ compensation ids forcing companies to put these issues for voting by the shareholders and the annual general meetings of listed companies.
“There’s a certain amount of nervousness within companies about what they’re paying directors,” Hodgson said. “More attention is being paid to outliers than in the past.”
According to global risk advisory firm Willis Towers Watson, demands for placing a cap on the limits of director compensation is also gaining ground with such demands from shareholders being backed by advisory firms Institutional Shareholder Services and Glass Lewis.