By Rebecca (Becky) Burton and Peter Kim | December 1, 2022

Equity-focused increases drive overall non-employee director compensation growth

Companies remain vigilant in their pursuit of balanced yet attractive pay programs amid a turbulent global economy. WTW’s Global Executive Compensation Analysis Team (GECAT) has completed its annual S&P 500 year-over-year director pay program analysis comparing results between 2022 and 2021 proxy data. Total pay for non-employee directors continues to grow at a modest but fixed rate led by a particular focus on equity.

More than half of companies (55%) disclosed pay program changes in 2022, compared with 39% of companies reporting changes in the prior year, reflecting a return to pre-pandemic prevalence. Approximately one-third of companies (34%) increased the value of their annual equity grant, while just under one-fourth (23%) of companies increased their annual cash retainer. Only 16% of companies adjusted their non-core pay elements.

The combination of cash and equity changes has pushed pay levels to a new milestone in the history of GECAT’s annual study, and median total direct compensation (TDC) now rests at $300,000 (a rise from $290,035). Additionally, in what appears to be an acknowledgement of increased public interest in diversity and representation, the gender landscape has shifted from 76% male/24% female in 2018 to 70% male/30% female in 2022.

The median annual cash retainer remained steady at $100,000.

68% of companies deliver all or a portion of annual equity value through restricted stock or restricted stock units, up from 67%

55% of companies made changes to their pay programs

58% of S&P 500 companies separate the roles of COB and chief executive officer (CEO)

Specific key findings include:

• Similar to the prior year, the median value of most individual cash components remained the same. Meanwhile annual stock compensation and TDC median values each increased 3%. Consequently, the pay mix for non-employee board members shifted to 61% in equity and 39% in cash (previously 60% in equity and 40% in cash).
• Shifts in cash compensation include the prevalence of board meeting fees declining by two percentage points to 4% and the prevalence of committee per-meeting fees declining by three percentage points to 5%. The median value of board meeting fees remained at $2,000, while committee per-meeting fees decreased from $2,000 to $1,500 (–25%). In contrast, additional committee chair retainer median values rose 17% (from $15,000 to $17,500).
• Median annual equity values continued upward across all vehicles, pushing overall pay mix more in favor of equity compensation. The median value increased 12% for stock options (from $89,167 to $99,955), 3% for deferred and phantom stock (from $165,047 to $170,000), 3% for restricted stock (from $170,043 to $175,055), and 4% for common stock (from $160,018 to $166,258). The number of companies granting deferred/phantom stock decreased one percentage point (to 17%), while the number of companies granting restricted stock increased one percentage point (to 68%). One-time initial stock grant prevalence remained at 9%, while the value at the median increased 18% from $170,000 to $200,000.
• Pay for board leadership roles outpaced TDC increases during the past fiscal year. Additional non-executive chair of the board (COB) pay rose 6% at the median (from $155,000 to $165,000), while additional lead independent director pay leapt 14% at the median (from $35,000 to $40,000). When compared with 2019, these values reflect an overall median increase of just 3% (from $159,959 to $165,000) for COBs and 33% (from $30,000 to $40,000) for lead directors.

• Will the utilization of equity continue be favored in lieu of cash, or will companies return their attention to include cash going forward?

Download the report

Title	File Type	File Size
S&P 500 director pay trends - Dec 2022 (EPM 1 Dec 2022)	PDF	.8 MB

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Source: WTW

https://www.wtwco.com/en-US/Insights/2022/12/2022-director-compensation-trends-at-S-P-500-companies