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The Evolution and Current State of Director Compensation Plans

Today we are sharing this article from the Harvard Law School Forum on Corporate Governance and Financial Regulation with helpful information to our readers. Even though director compensation programs look quite similar from company to company, the primary difference between programs is the level of compensation, not the form of compensation. Director compensation levels are significantly more compressed than they have been, and the preferred model for compensating Directors has become almost universal as corporate governance norms have evolved. Because the attraction and retention of skilled and qualified Directors is vital to U.S. companies and their shareholders, the current approach to compensation Directors primarily in cash and equity is well aligned with shareholders interests and companies’ need to compensate their Board fairly and equitably. As a result, the form of Director programs is not expected to change drastically for the next several years; however, market increases are expected annually in the amounts of Director compensation.

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