June 17, 2021 Executive Compensation Executive & Director Pay Design Reports

Director Compensation Practices in the Russell 3000 and S&P 500 - 2021 Edition

Corporate boards of directors face a more acute set of challenges in setting their compensation than they have in recent years. Until recently, a primary focus was the risk of shareholder litigation challenging allegedly excessive director compensation. That concern has receded as many companies have taken steps to mitigate the risk of lawsuits.

But now boards need to navigate two conflicting pressures. On the one hand, most boards may find it inappropriate to increase their compensation during the pandemic. On the other, there is pressure to think differently about (and in some cases increase) director compensation. Directors’ responsibilities and workload have substantially increased, and boards seek to attract a new breed of candidates with specialized skills and diverse backgrounds.

Against that backdrop, Director Compensation Practices in the Russell 3000 and S&P 500 reviews trends and developments at US public companies to provide insights into the compensation policies and programs for non-employee directors and help boards navigate these challenges.

The analysis covers pay levels (in total and by element), the prevalence and rate of increases by element (such as cash retainer, meeting fees, equity-based compensation, and perquisites), supplemental compensation, and premiums granted for committee service and board and committee leadership roles, stock ownership and retention guidelines, deferred compensation programs, and limits placed on director compensation. Statistics are reported in aggregate for each of the Russell 3000 and S&P 500, the 11 business sectors in the Global Industry Classification Standard (GICS), and 14 company size groups (measured by both revenue and assets)—to allow for targeted comparison.

The project is conducted by The Conference Board and ESG data analytics firm ESGAUGE, in collaboration with compensation consultancy Semler Brossy. See “Access our Online Dashboard” on p. 14 for more information on the study methodology as well as the definition of key terms (e.g., Total Compensation and Total Actual Compensation) used in this report. Visit conferenceboard.esgauge.org/directorcompensation to access and manipulate our data online.

Contributors

Mark Emanuel

Todd Sirras

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