Total pay for outside directors at the nation’s largest corporations increased by a mere 3 percent in 2017, driven by increases in cash and stock compensation, according to a new analysis by Willis Towers Watson, a leading global advisory, broking and solutions company.

The study also revealed that more companies are implementing annual limits on director compensation in the wake of shareholder lawsuits alleging that pay for board members is excessive.    

The annual analysis of director compensation at Fortune 500 companies found median total direct compensation for directors climbed 3 percent last year to $267,500, up from $259,750 in 2016. Total direct compensation includes cash pay, and annual or recurring stock awards. The median value of annual cash compensation increased 4 percent in 2017 to $107,500, bolstered by a 5 percent increase in the annual cash retainer to $100,000. Variable cash pay for board and committee meetings remained virtually unchanged. The median value of annual stock compensation rose 3 percent to just over $150,000. The average mix of pay remained constant at 57 percent in equity, 43 percent in cash.

“Director pay continues to be a hot topic for boards in light of continued attention brought on by shareholder lawsuits over alleged excessive stock grants made to directors,” Don Delves, North America leader, executive compensation, at Willis Towers Watson, said in a statement. “As a result, boards are looking for ways, such as adding limits specific to directors, to mitigate exposure to lawsuits.”

The study builds upon that observation. The percentage of companies that implemented an annual compensation limit jumped from 55 percent in 2016 to 61 percent last year. Fixed value limits (78 percent) are more prevalent than those based on a fixed number of shares (22 percent) as they offer a more clearly defined pay ceiling. Also, limits continue to go beyond covering only annual stock grants: 32 percent of annual limits now cover both stock and cash compensation, compared with 29 percent in 2016.

“Despite the overall stability of director pay we are seeing, it’s likely companies and their boards will continue to evaluate and, if necessary, refine their pay programs in the coming year,” Delves says. “Companies remain under pressure to attract and retain qualified individuals to serve as outside directors. Having a competitive and fair pay program will be critical to achieving that goal.”

The analysis touches upon a variety of other director issues.

Board leadership. Almost half of companies (49 percent) separated the positions of board chair and chief executive officer in 2017, up from 47 percent in 2016. 

Conversely, the prevalence of companies identifying a lead or presiding director decreased from 73 percent to 70 percent. Lead directors received an additional $30,000 in compensation last year.  

Stock ownership and retention guidelines. Companies continue to embrace stock ownership guidelines and retention requirements for directors. Ninety-four percent of Fortune 500 companies now have one or both mandates in place. The vast majority of ownership guidelines (84 percent) are based on a multiple of the annual retainer, while just over half of retention requirements (55 percent) require a holding period that lasts until the stock ownership guidelines are met.

Compensation review. Nearly half of companies (49 percent) review their director pay programs at least annually while three in 10 (29 percent) review their programs “periodically” or “from time to time.”

Willis Towers Watson analyzed the compensation for outside directors at 300 publicly owned Fortune 500 companies that filed their fiscal year 2017 proxy statements by June 30, 2018. Data for these companies was then compared against an analysis of the same 300 companies for 2016.