For many people, compensation isn’t the main reason for joining a board. But that doesn’t mean it shouldn’t be part of the conversation. Whether you’re an experienced director or hoping to land your first board seat, it’s important to understand how board compensation works so you can make informed decisions about what your expertise, skills and experience are worth.
Here is our best advice on board compensation:
Review the board’s compensation
Once you’ve decided to pursue a board opportunity at a specific company, review their director compensation plans. For public companies, the company’s annual proxy circular will include the compensation structures for the board of directors. If you’re pursuing a board opportunity at a private company, you can request information on the board’s compensation structure.
Compare to compensation trends
Don’t forget to determine if the board compensation aligns with the market comparables. You can review and compare board compensation trends using the Canada Spencer Stuart Board Index. Currently, we are seeing a trend toward fixed-fee retainers and away from per-meeting fees.
Ask the right questions
While reviewing a company’s board compensation, ask yourself: Is it in line with what you anticipated? What committees would you be expected to serve on, and would you be considered to chair one of these committees?
Understand compensation structures
Compensation will vary depending on the type of board you join. As board leader Michele Ashby advises, larger corporations pay more than smaller companies, and startups often pay in equity initially. Compensation is typically a package that may include retainers, meeting attendance fees, stock grants or options, bonuses and other benefits.
Understand time expectations
You should prepare to spend up to 300 hours per year on a corporate board, depending on the company’s priorities at any given time. However, the time commitment will depend on the board, so you should ask questions about time expectations as part of your due diligence.
