These days, executive level compensation is the subject of countless headlines. With CEOs earning wages in the tens of millions, people have a lot of opinions on the matter. Accordingly, the compensation for corporate directors (or non-executive directors) has also been rising.
In fact, a recent article in The Wall Street Journal asserts, “Pay for nonexecutive directors of S&P 500 companies rose nearly 50% between 2006 and 2014.” That’s quite a leap!
The median pay for directors in 2015 was $255,000 a year, which doesn’t sound quite as high as you might expect given that they’ve seen a 50% raise in a single decade.
When you consider that a director might spend about 5 hours per week on board related activities, the number becomes more impressive, though.
So why the sharp increase in compensation for board members? For one, the role has become more demanding in recent years. After the passing of the Sarbanes-Oxley Act in 2002, standards for board compliance were enhanced with stricter guidelines for reporting among public companies. Therefore, many board positions call for longer hours and deeper involvement. In addition, the rise of shareholder lawsuits has made the corporate director’s seat one that comes with more personal liability.
For these reasons and more, the corporate director role comes with more than just the gratification of sitting on an S&P 500 board—it also comes with a greater amount of responsibility. Many of the largest companies are willing to pay substantial figures to have the world’s most accomplished leaders serving on their board.