CHICAGO -- (BUSINESS WIRE) -- Director pay in the middle market continues its ascent. 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 time commitment required, coupled with the personal risk the director assumes, is also driving director compensation pay increases. Overall average director pay at $120,886, up from $110,155, has increased by nearly 10 percent, according to an analysis of 600 companies conducted by BDO USA, LLP, a leading accounting and consulting organization. The increase in pay is not the result of a major spike in any one compensation element, but a steady increase in board retainer and committee fees, up 9%, and equity awards and options, up 11%.
Average pay mix across all surveyed middle market companies shows director compensation packages favor board retainers and fees ($47,129) and full-value equity awards ($46,975), each comprising 39% of total pay mix and a combined 78%, while committee retainers and fees ($8,123) and stock option awards ($18,659) reflect only 22% of the total director pay. The trend toward an increase in full-value equity compensation has been ongoing for nearly a decade—as part of a deliberate decision to provide the opportunity to board members to amass capital over a ten year period as a director.
“Market conditions play a major role in the increase in full-value equity pay. People think macro factors are out of their hands, so this is a way of hedging against a volatile market. The underlying point is that the company has to be successful to realize value of these awards,” said Randy Ramirez a Senior Director on Compensation in the Corporate Governance Practice of BDO USA. “Expect to see the trend of higher compensation in growth industries, such as energy and healthcare, as they continue to increasingly intertwine with legislative action and the global marketplace.”
These findings are from the most recent edition of The BDO 600: 2012 Survey of Board Compensation Practices of 600 Mid-Market Public Companies which examines the director compensation trends in publicly-traded companies with annual revenues from $25 million to $1 billion in the energy, healthcare, manufacturing, real estate, retail and technology industries; and publicly-traded companies with assets between $50 million to $2 billion in the banking and financial services industries. The study included proxy statements that were filed between May 15, 2011 and July 15, 2012.
Year-over-Year Industry Compensation:
2010 Total Average
2011 Total Average
|Financial Services-Non Banking||$||77,022||$||85,132||10.5%|
Further findings from the BDO 600 Survey of Mid-Market Board Compensation Practices:
*Material discussed is meant to provide general information and should not be acted on without professional advice tailored to your firm’s individual needs.
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