Pay for directors at the biggest U.S. companies held steady last year, a first in more than a decade.
An analysis of the 100 largest publicly traded U.S. companies by revenue found that median pay for directors in 2020 was $310,000, flat from 2019 and up from $305,000 in 2018.
That is likely to change, with the boards of some companies already moving to increase their pay this year, said Compensation Advisory Partners, the consulting firm that produced the report.
Some company directors sought to signal that they shared in the cost of company performance struggles amid the pandemic and widespread job loss, as well as sought to reduce the risk of shareholder litigation.
“There’s still some sensitivity to the optics around Covid and where the world is at,” Daniel Laddin, founding partner of the firm, said. “As the year progresses, we expect more boards to feel comfortable not only reviewing the director pay programs, but approving increases.”
About 9% of the companies disclosed increases in director pay in 2020, compared with 25% to 33% in recent years. Most boards typically review director pay annually in the spring—just when the coronavirus pandemic became a crisis in 2020.
“It was just not the right time,” Mr. Laddin said. “This is definitely anomalous.”
About 15% of boards reduced director pay during the height of the pandemic last year, typically by suspending cash compensation for several months, CAP found.
Maggie Wilderotter, who serves on five public company boards, said she and other directors at Hewlett Packard Enterprise Co. also took the 25% cash pay cut executives received, amid broader company layoffs during the pandemic. The board pay cuts lasted for several months in 2020, she said, and the technology company has stabilized and is poised to grow.
On average, directors at the companies in the CAP analysis earned 39% of their pay in cash, and the rest in stock, stock options or related instruments. Often, reductions echoed temporary cuts in cash compensation for top executives.
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“In most cases it was a symbolic measure to share the pain and to show that there was real commitment to not being exempt from the conditions that were impacting everyone else,” said Jane Stevenson, a vice chairwoman at leadership advisory and executive recruitment firm Korn Ferry.
Many directors’ workloads also rose by 50% to 100% during the past 18 months because of Covid-19, an increasing focus on environmental, social and governance issues, and other factors, Ms. Stevenson said. Some boards met weekly last year, instead of every other month or quarterly in more normal times. Many are still meeting monthly.
Janet S. Wong, who sits on the board of electric vehicle maker Lucid Group Inc. and three other companies, said two of them kept compensation flat based how directors’ pay compared with similar companies.
One of her boards recently recommended paying directors a one-time bonus when the company approved bonuses for employees next year, to recognize more frequent meetings and a more complex workload than in the past, Ms. Wong added. She declined to say which companies made the changes, citing board confidentiality.
For the first time, the CAP analysis found, a majority of the companies in 2020 explicitly limited total director pay under shareholder-approved plans: 53% of companies did so, up from 46% in 2019. The share of companies limiting at least one component of pay rose to 71% from 66% a year earlier.
With a median of $750,000 per director, the limits tend to sit well above the amounts directors typically receive, CAP said.
More companies began asking shareholders to approve limits on director pay during the past decade after state-court rulings suggested that the lack of effective limits—and the fact that directors set their own compensation—could leave board members more vulnerable to shareholder litigation.
In effect, courts said, directors can be subject to a more rigorous legal standard when investors sue over board-pay decisions. By getting shareholder approval, boards are more likely to be held to a “business judgment” standard, under which courts typically defer to company decisions.
Directors at Facebook Inc. were among those hit with lawsuits over board pay practices. Facebook and the directors denied wrongdoing and settled the lawsuit in 2016, agreeing to seek shareholder approval for some prior director pay and for its annual director pay plan. Facebook had no comment beyond its securities filings.
Write to Theo Francis at theo.francis@wsj.com and Emily Glazer at emily.glazer@wsj.com
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