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No question comes up more often in our discussions with company owners than “How much should we pay our independent directors?” In this article we examine the results of our most recent research that highlights how much board members should receive in compensation.
As we have noted in the past, there are a wide range of variables that factor into director compensation. These include industry, business size, business structure, number of yearly meetings and more. Unfortunately, private companies struggle to find accurate benchmarks for their Board compensation plans.
Lodestone Global recently published their 8th Annual 2019 Private Company Board Compensation Survey (contact firstname.lastname@example.org for more information). The survey included 319 companies across 33 different industries and 32 countries to analyze current board practices and compensation around the world. All the respondents were members of the Young Presidents’ Organization (YPO), an international group of Presidents and CEOs. The organization unites approximately 25,000 business leaders in more than 130 countries. The 319 respondents were all CEOs of companies ranging from $10m to over $1bn in revenues.
2019 Board Compensation Highlights:
These results support the notion that a board, particularly with the right directors, can be essential to achieving corporate goals and improving profitability.
50% of the survey respondents were family owned companies. The high participation rate of family majority owned respondents highlights the importance of professional corporate governance to family companies.
The median number of board members was 6, with 3 independent directors. This has not changed over the eight years the survey has been running. A significantly larger board leads to inefficiencies, while a smaller board risks limiting diversity of perspective so essential to driving effective strategy.
Historical Compensation Data
*Note: All figures in $USD unless indicated otherwise
*Data represents the median results. Total compensation assumes 4 in-person and 2 teleconference meetings.
The continuing rise in board compensation directly reflects the valuable contribution that these directors make to the profitability of the enterprise. The survey data indicates that 48% of the respondents categorized their boards as indispensable or very effective at driving corporate strategy. In addition, we cannot emphasize enough that 94% of companies reported increased revenues since implementing a board. We don’t confuse correlation with causality (i.e., having a board doesn’t guarantee revenue growth), but the implication of the contribution of an effective board is inescapable.
If you have additional questions on Compensation or Governance issues – please comment below!
is a specialized consulting firm providing strategic guidance to chief executives of private and family controlled enterprises, who are considering forming or refreshing a board of directors. Lodestone Global also offers custom tailored board compensation analysis.
January 31, 2019 at 02:46PM
Forbes – Entrepreneurs