In-demand directors see pay rise nearly 10%

Membership on corporate boards has its privileges.

Annual compensation for directors in middle-market companies rose 9.7%, according to an analysis by BDO USA, which looked at proxy statements of more than 600 publicly listed companies with between $25 million and $2 billion in annual revenue.

Average pay for directors is $120,886, up from $110,155 the previous fiscal year, according to the analysis. Growth industries in particular tended to pay the most.

“The year-over-year increase in director compensation indicates that businesses see a need to pay top dollar for the most qualified director, ensuring that he or she is able to be effective in a tumultuous but growth-driven economic climate as well as in a time of increased regulation, public scrutiny and investor demand,” the BDO press release said. BDO also cited the time commitment required of directors and the “personal risk” directors assume in a time of increased regulation and scrutiny from investors and the public.

Amongst the most sought-after candidates for director positions: CFOs. A recent Ernst & Young survey showed that 79% of CFOs are experiencing increased demand for their expertise on corporate boards. The advantage for CFOs is a chance to step outside their industry and demonstrate collaborative skills.

BDO’s analysis found that:

• Pay in the technology sector grew 18.6%, to an average of $177,249.

• Directors in the energy sector were paid $151,254, an increase of 8.1%.

• Health care directors’ pay increased 7.8% to $148,272.

• Though the financial services (banking) sector saw the second-highest percentage increase at 13%, pay for directors rose to $57,426, by far the lowest average for a sector. Nonbanking financial services director pay climbed 10.55% to $85,132.

The average pay for directors breaks down as follows:

• Board retainers and fees: $47,129

• Full-value equity awards: $46,975

• Stock option awards: $18,659

• Committee retainers and fees: $8,123

The analysis was based on proxy statements filed between May 15th 2011 and July 15th 2012. The pay increase comes from several areas, including equity awards and options (up 11%) and board retainers and fees (up 9%). In the previous year, equity awards increased 22%.

“Market conditions play a major role in the increase in full-value equity pay,” Randy Ramirez, a BDO senior director, said in a statement.

—Neil Amato (namato@aicpa.org) is a CGMA Magazine senior editor.