Fewer companies are choosing to pay directors for their time in board and committee meetings as the Covid crisis, which drove more ad hoc and virtual meetings, draws to a close.
Getting rid of meeting fees and funneling that money to annual cash or equity retainers takes "a lot of noise out of the system," said Ryan Hourihan, a managing director at Pearl Meyer. "It's not a takeaway, but more of a simplification [of] director compensation."
Although companies are broadly getting rid of meeting fees, those that do pay them have explored increases to secure AI- and cyber-savvy talent, among other specialized skill sets, Hourihan said.
Only 10% of 1,400 companies studied in a new report from the National Association of Corporate Directors and Pearl Meyer pay board meeting fees. The prevalence of meeting fees has declined due to an increasing volume of board duties and the blurring of lines around what constitutes a meeting, sources said.
"With the number of expectations associated with board service and the added fluidity of board meetings... the administration of meeting fees is kind of a pain," Hourihan said. "There's a lot of gray area, which leads to lumpiness [in pay] year over year."
This all comes as boards continue to hold fewer meetings. The median number of six meetings per year is the lowest in the past five years, according to the NACD and Pearl Meyer report.
"The decline in meeting fees is here to stay," Hourihan said. "I don't think they are coming back in any way, shape, or form."
While compensation for committee work is dropping, the same can't be said for committee chairs. "Given additional scrutiny from shareholders, [committee] chairs have additional liability and agenda items, which is acknowledged in the incremental uptick in chair comp, because the buck stops with the chair,” Hourihan said.
Hourihan also noted generally that other committee chairs' pay is catching up to audit chairs as workloads increase. For example, comp committees are increasingly tackling human capital issues, and more nom-gov committees have elements of ESG as part of their remits.