While median pay for outside directors at the nation’s largest corporations increased modestly in 2015, the growing trend of taking a fixed approach to director pay drove the annual cash retainer for board service to $100,000 for the first time, according to an annual analysis of director compensation at Fortune 500 companies.

The study, by Willis Towers Watson, a global advisory firm, found that the median total direct compensation for directors climbed 3 percent last year, to $263,500, an increase from nearly $255,000 in 2014. Total compensation, which includes cash pay, and annual or recurring stock awards, increased 4 percent the previous year. The median value of cash compensation increased 6 percent in 2015, to more than $108,000. Meanwhile, the value of stock compensation rose 3 percent at the median, to almost $150,000. The average mix of pay remained relatively constant at 57 percent in equity and 43 percent in cash.

“Companies continue to adjust their director pay programs with an eye toward rewarding directors for their overall contributions rather than for how many meetings they attend,” says Robert Mustich, leader of Willis Towers Watson’s Executive Compensation Consulting practice in the eastern United States. “The fact that a third of the companies we analyzed changed one or more core elements of their pay program in the past year reflects an ongoing trend toward companies reviewing and adjusting their director pay packages on a regular basis to remain competitive.”

The annual cash retainer for board service increased 9 percent in 2015, rising to a record high of $100,000 at the median. About one-fifth of the companies increased their board retainer. The prevalence of variable elements of cash pay continued to shift in opposite directions. The use of committee attendance fees fell from 22 percent to 18 percent, while the use of flat, retainer-based pay for committee service increased from 25 percent to 27 percent. The number of companies providing an annual board retainer as the sole form of cash compensation increased from 40 percent in 2014 to 42 percent last year.

 “Given the growing demands and pressures being placed on directors, attracting and retaining qualified candidates to serve remains a challenge for many companies. As such, we expect companies will continue to evaluate the role of fixed and variable pay as well as cash versus stock compensation in their director pay programs and make appropriate adjustments as needed,” Mustich says.

Among the survey’s findings:

Companies continue to embrace stock ownership guidelines and retention requirements for directors. Ninety-three percent of Fortune 500 companies now have one or both mandates in place. Eighty-one percent of ownership guidelines are based on a multiple of the annual retainer, with two-thirds of those set at a multiple of five.

Companies are imposing caps on directors’ potential stock grants in response to recent court rulings. More than four in 10 companies have a director-specific award limit in place, with half of these limits having been adopted or amended since 2015.

Eighty-six percent of companies that have a lead director provided an additional fee for such service, up from 83 percent in 2015. The lead director fee increased 20 percent at the median to $30,000. Nearly one in five companies with an existing lead director fee in place increased the fee this past year.

Willis Towers Watson analyzed the compensation for outside directors at 250 publicly owned Fortune 500 companies that filed their fiscal year 2015 proxy statements by June 30, 2016.

 

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