BOARD DIRECTOR COMPENSATION GROWTH DECELERATES, BDO USA ANALYSIS FINDS

November 2015

Emily Dell
Bliss Integrated Communication
Emily@Blissintegrated.com

Chicago – November 17, 2015 – Board director compensation decelerated significantly in 2014, increasing a modest 6 percent and reaching $147,551, according to The BDO 600: 2015 Survey of Board Compensation Practices of 600 Mid-Market Public Companies study. This is half the growth rate seen between 2012 and 2013, when board compensation increased by 12 percent.
 
The study was conducted by BDO USA, LLP, a leading accounting and consulting organization, and analyzed proxy statements filed between May 15, 2014 and May 15, 2015.
 
“Compensation packages are increasingly reflective of the growing pressure on boards to be more accountable for the performance of the organization as a whole," said Randy Ramirez, a senior director in the Global Employer Services Practice at BDO. "Underscoring the efforts to align board interests with those of shareholders, stock awards continue to grow in popularity, making up almost half of all board compensation packages in 2014.”
 
Ramirez continued, “Mid-size companies are also following the trend toward eliminating meeting fees for board members and moving towards an all-retainer approach. This is in an effort to realize the notion of role equalization, versus the prior practice of weighting some roles heavier and compensating them at a premium rate, and communicate that all roles are important and meetings are mandatory."
 
Stock awards continue to make the bulk of the compensation package; stock options decline
According to the study findings, board compensation continues to rely heavily on full-value stock awards, which made up 47 percent of the pay mix in 2014, up from 45 percent of the compensation package in 2013. The second largest portion was retainers and fees, which made up 39 percent of the compensation package – same as in 2013. Meanwhile, there was a slight decline in stock options, which decreased to 8 percent of the compensation package from 10 percent in 2013.
 
Fiscal Year Board Retainers
and Fees

Committee Retainers 
and Fees

Stock Awards Stock Options Totals
2014 $57,244 $8,789 $70,028 $11,489 $147,551
2013 $53,774 $8,531 $62,904 $13,839 $139,048
2012 $49,930 $8,205 $54,005 $12,475 $124,615

Energy company boards receive the highest increase in compensation, while financial services non-banking boards see a decline
Energy company directors experienced the highest compensation increase in 2014 (14 percent), bringing in an average of $192,509 in compensation. The second largest growth spot was in the retail sector, whose directors received a compensation increase of 11 percent. Healthcare and technology sectors followed with increases of 8 and 6 percent, respectively.
 
Ramirez said, “Industries like energy and retail, have also been under a great deal of pressure in the last performance year, and are placing premiums on board members that have current, relevant industry experience and are currently employed as executives within the industry.”
 
Industry 2013 Total Average 2014 Total Average Percentage Change
Energy $168,214 $192,509 14%
Financial Services - Banking $67,301 $69,092 3%
Financial Services - Non Banking $123,421 $120,453 -2%
Healthcare $163,069 $176,749 8%
Manufacturing $129,291 $133,696 3%
Real Estate $146,490 $153,587 5%
Retail $118,997 $132,123 11%
Technology $194,341 $205,293 6%
 

In 2014, non-banking directors experienced a 2 percent decline in compensation. This comes after a 36 percent increase in 2013. Meanwhile, for the fifth consecutive year, banking was the least compensated sector, whose directors received an average compensation of $69,092. 
 
Director compensation declines at the smallest companies
Board compensation at companies with the smallest revenue ($25 million - $325 million) declined 2 percent in 2014 after an increase of 15 percent from 2012 to 2013. At the mid-sized ($325 million - $650 million) and largest ($650 million - $1 billion) revenue ranges board compensation increased by 4 and 7 percent, respectively.  
 
Company Size 2014 Director Pay 2013 Director  Pay
$25 million - $325 million $117,440 $119,619
$325 million - $650 million $144,185 $138,789
$650 million - $1 billion $157,823 $146,998
 
About The BDO 600: 2015 Survey of Board Compensation Practices of 600 Mid-Market Public Companies
The BDO 600: 2015 Survey of Board Compensation Practices of 600 Mid-Market Public Companies examines director compensation trends in publicly-traded companies with annual revenues ranging from $25 million to $1 billion in the energy, healthcare, manufacturing, real estate, retail and technology industries; and publicly-traded companies with assets ranging from $50 million to $2 billion in the banking and financial services industries. The study includes proxy statements that were filed between May 15, 2014 and May 15, 2015.
 
*Material discussed is meant to provide general information and should not be acted on without professional advice tailored to your firm’s individual needs.
 
About BDO USA
BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. For more than 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm serves clients through 63 offices and more than 450 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multi-national clients through a global network of 1,328 offices in 152 countries.
 
BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International  Limited, a UK company limited by guarantee, and forms part of the international BDO network of  independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. For more information please visit: www.bdo.com