In April, we published a detailed analysis of year-over-year CEO compensation trends at companies in the S&P 500 index. We now turn our attention to non-employee director compensation at Fortune 500 companies. In our analysis, we found director pay increased by 10.0 percent from 2005 to 2006, reaching a median of $165,000. This advance was largely driven by a 7.7 percent increase in median annual equity awards over the same period.

Board Member Pay

Total Compensation

From 2005 to 2006, median Board-level compensation for non-employee directors at Fortune 500 companies increased 10.0 percent, rising from $150,000 to $165,000. Board-level compensation is calculated as the sum of annual retainers paid in cash and/or equity and Board meeting fees. All Committee-level fees (discussed below) are excluded from the calculation of total Board-level compensation.

Cash Retainers

The median value of Board-level annual retainers paid in cash remained flat at $50,000 from 2005 to 2006; however, the prevalence of such fees fell slightly from 96.3 percent of companies in 2005 to 95.6 percent in 2006.

Equity Retainers

In contrast, the median value of Board-level annual retainers paid in equity increased by 7.7 percent, climbing from approximately $93,000 in 2005 to $100,000 in 2006. Over the same period, the prevalence of annual retainers paid in equity saw a slight increase, rising from 94.1 percent to 95.0 percent. Equity retainers include compensation paid in stock, options, or units.

Meeting Fees

From 2005 to 2006, the median value of aggregate Board meeting fees remained virtually flat; increasing by only 0.8 percent from $12,800 to $12,900, respectively. At the same time, the prevalence of Board meeting fees dropped from 57.0 percent of companies in 2005 to 51.1 percent of companies in 2006. Board meeting fees include both cash and equity payments.

Composition of Board Member Pay

To examine the composition of Board member pay at Fortune 500 companies, Equilar categorized the components of Board-level annual retainers into various combinations of cash, stock, option and unit awards.

As the following chart illustrates, in 2006, 25.5 percent of Fortune 500 companies awarded their annual retainer for non-employee directors as a combination of cash and units. The next most prevalent combination, appearing at 23.1 percent of companies, consisted of cash and stock awards.

Audit Committee Pay

Total Committee Compensation

In 2006, Audit Committee members at Fortune 500 companies received a median pay package of $10,000. This amount is down 4.8 percent from the median of $10,500 awarded in 2005. Total Audit Committee-level pay is calculated as the sum of annual retainers (both cash and equity) and meeting fees.

Audit Committee Meeting Fees

While a majority of companies still provide the bulk of Audit Committee-related compensation in the form of meeting fees, from 2005 to 2006, the percentage of companies paying Audit Committee meeting fees declined from 60.4 percent to 56.1 percent. Among this set of companies, the median per-meeting fee remained unchanged at $1,500.

Audit Committee Retainers

While the number of companies paying their Audit Committee members with meeting fees decreased, the prevalence of companies providing annual retainers to Audit Committee members increased, climbing from 28.0 percent of companies in 2005 to 30.8 percent in 2006. Furthermore, among companies providing a retainer, the median value of Audit Committee member annual retainers increased by 21.1 percent; from $8,250 in 2005 to $10,000 in 2006.

Compensation Committee Pay

Total Committee Compensation

In 2005 and 2006, Compensation Committee members at Fortune 500 companies received a median of $6,000 in total Committee-level compensation. Total Committee-level compensation is calculated as the sum of annual retainers (both cash and equity) and meeting fees.

Compensation Committee Meeting Fees

While many companies still provide most Compensation Committee-related pay in the form of meeting fees, from 2005 to 2006, the prevalence of companies providing these fees declined from 58.5 percent to 53.9 percent. Among these companies, the median per-meeting fee remained unchanged at $1,500.

Compensation Committee Retainers

As the prevalence of companies offering meeting fees to Compensation Committee members fell, the number of companies providing annual retainers to committee members increased slightly, rising from 15.1 percent of companies in 2005 to 15.7 percent in 2006. Furthermore, among companies providing a retainer, the median value of Compensation Committee member annual retainers increased by 4.2 percent; from $6,000 in 2005 to $6,250 in 2006.

Board & Committee Meetings

Board Meetings

From 2005 to 2006, the median number of Board meetings held annually by Fortune 500 companies increased from seven to eight. However, the prevalence of companies holding ten or more Board meetings per year decreased slightly, from 25.2 percent of companies in 2005 to 24.9 percent of companies in 2006.

Audit Committee Meetings

For Audit Committee members, the median number of meetings held per year did not change, staying fixed at nine. Still, the prevalence of companies holding ten or more Audit Committee meetings per year decreased, falling from 47.4 percent of companies in 2005 to 43.0 percent of companies in 2006.

Compensation Committee Meetings

The median number of Compensation Committee meetings held per year also did not change, remaining at six. The prevalence of companies holding ten or more Compensation Committee meetings per year dropped, falling from 7.8 percent of companies in 2005 to 6.3 percent of companies in 2006.

Follow-Up

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