#None #NACD #Pearl Meyer #Director Compensation

Director Pay Trends: A Look at 2025

The National Association of Corporate Directors (NACD) has just released the latest insights from its annual Director Compensation Report, shedding light on the growth of public company board directors' compensation. As director roles evolve and expand in response to broader governance and strategic responsibilities, median director pay has seen a modest increase of 3% year-over-year for 2025.

Key Findings from the NACD Report

According to the report, which analyzed compensation practices from 1,400 public companies across 24 different industries, the total director compensation (TDC) increased slightly as boards adapt to contemporary challenges, specifically in technology oversight and risk management. Some notable findings include:

• - Smaller companies, particularly those with revenues between $50 to $500 million, saw the highest year-over-year increase of 8%, indicating a narrowing pay gap with larger firms.
• - The audit committee chairs remain the highest earners among board members, with a notable 29% increase in the compensation of compensation committee chairs from 2020 to 2025, showcasing the growing importance of these positions.
• - Compensation structures are becoming simpler, with a greater focus on predictable cash retainers and full-value equity awards, marking a shift away from complex variables such as meeting fees and stock options.

Shift in Governance Practices

The NACD report notes that the median tenure for directors has decreased significantly, now standing at 6.1 years down from 8.7 years in 2015. This suggests a rising emphasis on board refreshment and effective governance. Furthermore, the report highlighted a strong representation of women in leadership roles, with 97% of boards having at least one female director in 2025.

Additionally, the trend of combining CEO and board chair roles is on the decline, with only 35% of companies maintaining this structure, indicating a shift towards more checks and balances within corporate governance.

The Future of Director Compensation

As companies continue to navigate complex environments, the NACD emphasizes that director compensation is being finely tuned to ensure it supports effective oversight without unnecessary complexity. Peter Gleason, president and CEO of NACD, remarked on the evolving nature of board expectations, stating, "Boards are being asked to oversee a broader array of strategic issues and risks, yet they continue to approach compensation with a disciplined mindset that aligns with long-term shareholder interests."

Ryan Hourihan from Pearl Meyer reiterated the importance of simplicity and alignment in compensation practices, stressing that as responsibilities grow, enhancing pay programs to support governance must be balanced with transparency and efficacy. This signals a critical juncture for public company directors as they prepare for ongoing challenges in governance and management.

Overall, as we look forward to the future of board governance and compensation, this report from the NACD and Pearl Meyer sheds essential light on how directors' roles are adapting and evolving in a continually changing corporate landscape. It marks a significant point of reflection for organizations and directors aiming to foster sustainable growth and effective oversight in the years to come.