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Korn Ferry Study Finds Director Compensation Now Focused More on Committee Contribution and Specialized Expertise
-- Sixth Annual Analysis Finds Year-Over-Year Total Director Compensation Relatively Flat
--Median Total Compensation for Directors Between $256,500 and $274,200
LOS ANGELES, Nov. 3, 2016 —The Korn Ferry division of Korn Ferry (NYSE:KFY) has released findings of its sixth annual director compensation and benefits study. The study, which includes data from the 300 largest companies that filed proxy statements between May 1, 2015, and April 30, 2016, finds less change at the overall board compensation level and more at the committee level, which is recognition of the fact that much of the board’s important work is now undertaken by committees.
The report notes a trend toward including additional retainers for the so-called “Big 3” committee chairs – audit, compensation, and nominating/governance committees, exemplifying the need for board members with specific expertise.
'Director pay is a reflection of the board’s increased fiduciary duties and risk as well as the escalation of new regulations,” said Irv Becker, North America Leader for Korn Ferry’s Executive Pay and Governance practice. “Serving as a director today is not only a more time-consuming and tougher job, but it also requires more specialized talent, and directors should be paid accordingly.”
In 2015, the median total direct compensation for directors in the analyzed companies ranged between $265,500 and $274,200.
More companies are continuing to eliminate fees for simply attending board meetings, and instead are focusing on packages that include an annual retainer (cash and/or equity), committee chair retainers, and long-term incentives in the form of restricted stock, restricted stock units, common or deferred stock.
Breakdown of Total Director Compensation Elements
“In terms of future trends for director pay, we expect to see more companies continue the current trend toward eliminating board and committee meeting fees and instead recognizing the crucial role and additional investment of time of those who serve on key committees,” said Becker. “Effective directors are in great demand because they have unique skills that are critical to a company’s success, and should be fairly compensated for their efforts.”
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