It pays to sit on the board of an oil, mining or energy company.
Directors in the basic materials sector of the Standard & Poor’s 500 index had the highest pay compared with directors of companies in other industries, according to a new study by Equilar, an executive compensation firm in Redwood City, Calif. Their median retainer last year was $275,000, a 23.6 percent increase from 2010.
Overall, for companies in the S&P 500, director pay hit a new high of $233,600 last year, according to Equilar, up 16.8 percent from 2010.
The next highest paid were directors of technology and health care companies, where the median retainers were $265,000 each, up 15.8 percent for tech and 16.5 percent in health care. The pay of directors at consumer goods companies was $225,000, up 12.5 percent.
Financial services was second lowest, next to utility companies. Median director pay was $205,000, up 16 percent.
Director pay is on the rise while boards face greater scrutiny by proxy advisory services and activist shareholders. Boards are confronting more disclosure requirements and tougher regulations.
“We anticipate similar increases in the near future for directors as demands continue to grow in the post-Dodd Frank environment,” said Matt Wolfson, a senior consultant with Meridian Compensation Partners.
Institutional Shareholder Services, a proxy advisory firm in Rockville, Md., is pushing to limit the number of boards that non-chief executive directors sit on at any one time. ISS now puts the limit at six boards. By 2017, it will recommend no more than five boards.
“There’s too much work and too much time required” of directors, said Carol Bowie, the proxy advisory firm’s head of research in the Americas. Rising director pay is a reflection of the greater time commitment, she said.
Pay is also on the rise as courts crack down on compensation plans for non-executive directors. A Delaware court ruled this year that plans should be evaluated under stricter standards, particularly where directors were deciding on equity compensation.
The Equilar study found that 97.8 percent of S&P 500 company directors had some of their pay in cash, 36 percent had some stock and 59.4 percent had restricted stock units. In health care, 70 percent of the companies offered stock units as part of director pay. In financial services, only 48 percent offered units.
Director roles matter, too. Non-executive board chairmen had a median retainer of $387,500, up 12.7 percent from 2010.