The annual compensation paid to board directors is generally composed of an annual cash retainer, board meeting fees, and stock options or stock grants. These stock options are generally equivalent in value to 20-25% of a director’s annual retainer. A standard compensation package might consist of a $100K cash retainer, $1500-2500 fee per board meeting and a stock grant of $25K. Averaging eight total board meetings per year this totals to $147 in annual compensation. This annual package and an average board tenure of 8.6 years would total to approximately $1 million annuity over the course of that tenure.

Board members may also receive further compensation for serving on multiple committees, serving as a committee chair, or participation in special projects. Typically, expenses and travel fees are also reimbursed separately from annual compensation.

These numbers will continue to grow as annual director renumeration has been steadily rising in recent years due to the complexity of board governance and regulation.

As it nears the end of 2023, many of America’s top public companies showcase increasingly diverse boards of directors. Although there has been significant progress in expanding director appointments, to reflect many types of diversity, there is always room for improvement. Recently, the corporate sector has been overwhelmed by the impact of the pandemic, geopolitical shifts, environmental changes, and social justice movements, which have taken the country by storm over the past few years. Pressure from stakeholders and regulators for company leaders to acknowledge such events, and actually take a stance, is continuously increasing. Diverse boards are seen as better equipped to navigate complex, multifaceted issues, adapt to change, and sustain companies in the face of evolving global challenges. So, the search for more diverse perspectives in the boardroom continues, meaning that demand for diverse directors, with varied backgrounds, knowledge, and experience, are still on the rise.

According to the seventh edition of “Missing Pieces,” historically underrepresented groups, including women and Black/African, Hispanic/Latinx, Asian, Native American/Alaska Native, Native Hawaiian/Pacific Islander, or multiracial men, continue to make strides in the boardroom. In 2022, women held upwards of 30% of board seats in the Fortune 500, which marks about a 5% increase from just two years prior. The number of Fortune 500 board seats held by racial and ethnic minorities also saw about a 5% increase and now stands at 22.2%. 53 companies in the Fortune 500 have more than 60% of their board seats filled by individuals from historically underrepresented groups, the highest percentage in its history. Additionally, from the 2023 Spencer Stuart Board Index, 67% of all new directors, at S&P 500 companies, are from historically underrepresented groups and 48% of all directors are diverse, a 2% increase from 2022. These findings indicate progress, albeit at a gradual pace. At the current rates of increase, for diverse board membership, it will take several decades for America’s leading corporate boards to truly reflect the diversity of the actual population.

In recent years, overwhelming amounts of evidence have come out showing the improvements that board diversity makes on performance and leadership. Expanding the boardroom to be more diverse and inclusive often increases financial returns and improves corporate reputations. Diverse boards are also associated with stronger risk management and strategy planning. Positive effects, such as these, serve as strong incentives for investors to actively seek out boards that prioritize diversity. With the increasing value of diversity, board selection should address existing gaps in the board’s makeup, keeping gender, age, race, and ethnicity, but also professional experience, in mind. By setting goals to fill these gaps, boards gain diverse perspectives and are able to contribute to many aspects of organizational success and financial effectiveness. It’s important for board members to align themselves with the interests of the groups they represent, to ensure the board is held accountable to satisfying the diverse needs of these groups. If boards are diverse, they make better decisions, which keeps these groups engaged. Informed decision-making is necessary to keep internal matters at bay, keep up with market trends, and maintain healthy public relations. This will also maintain the sustainability and long-term success of the board and strengthen stakeholder trust, as investors want companies to be socially responsible and have diverse employees. Keeping this in mind, it is often most beneficial for companies to focus on prioritizing what is in the best interest of investors and the public.

The demand for board diversity and recognition of its importance continues to grow, and many legislative measures have been implemented to ensure increased diversity within public companies. The U.S. Court of Appeals for the Fifth Circuit recently upheld Nasdaq’s board diversity rule, originally approved by the U.S. Securities and Exchange Commission in 2021, which requires Nasdaq companies to have a minimum of two diverse directors, including at least one woman and one individual from an underrepresented minority or self-identifying as LGBTQ+. Despite resounding support for board diversity and its benefits, there has been some concern over the Supreme Court’s landmark affirmative action ruling. While this ruling only specifically ended race-conscious college admissions, Justice Neil Gorsuch has insinuated that it should and will apply to the hiring process of employers wanting to hire diverse employees. Regardless, stakeholders appreciate diversity in the boardroom, as organizations that prioritize diversity are seen as more resilient, innovative, and socially responsible. Embracing board diversity is a moral imperative, necessary for business success. If companies continue to build more diverse boards, it shows further progress in addressing the complexities of a diverse world.

Elizabeth Anna Holmes is the founder and CEO of Theranos, a medical technology startup which claimed to have revolutionized blood testing by using much smaller amounts of blood and hence making it abundantly more convenient and accessible. By 2015 Theranos was valued at $9 billion and Holmes was named the youngest and wealthiest female self-made American billionaire by Forbes. However, allegations against the credibility of her claims began to come to light in late 2015 and today Elizabeth Holmes faces up to 20 years in federal prison.

Holmes’ strategy when it came to her board of directors was to recruit big important people, not necessarily ones with experience in the field or even in business. By the time Theranos was outed its board of directors consisted of people such as Henry Kissinger, former Secretary of State, Richard Kovacevich, former Wells Fargo & Co. CEO, Sam Nunn, former US Senator, and other well known figures. This led to a board of directors composed nearly entirely of powerful figureheads of the country, lending credibility to the company. The natural question then is how, exactly, Elizabeth Holmes, a young unknown entrepreneur, was able to convince such people to invest their lives in her company. The answer is still unclear but many believe that her charisma played a major part in her success; reports describe her as tall, with a deep voice uncharacteristic of an nonsmoking woman in her thirties and dressed consistently in expensive black turtlenecks. Witnesses say that, without any shared history or relationship, she was able to convince Henry Kissinger to join her board of directors after a single brief meeting.

Today, in the aftermath of Theranos’ downfall, it is worthwhile to question the motivations, roles, and choices of its board of directors. Theranos has been exposed as a complex scheme and the devious brainchild of Elizabeth Homes herself, but how were the board directors involved? Evidence suggests that few if any of them were aware of the extent of the fraud and so during the criminal investigation they were deemed guiltless. However, a board of directors is directly responsible for the actions and decisions of its company, and so even if none of the directors were “on the inside” of the scheme, are they in fact innocent?

While the story of Theranos and Holmes and their star-studded board makes a good read, or watch, it also provides an important lesson for board directors everywhere. A board is tasked with overseeing the mission and integrity of a company; its directors should never be willing to compromise that even if under the spell of corporate charisma.

NYSE Diversity for Listed Companies

On August 6th, 2021, The U.S. Securities and Exchange Commission approved the rule changes proposed by the Nasdaq Stock Market regarding board diversity. The rule stipulates that the boards of Nasdaq-listed companies must have one director who identifies as female and another who is a member of an underrepresented minority group or is LGBTQ+, reports BBC News. Otherwise, companies must provide transparency on their board selection process.

In contrast, the New York Stock Exchange leads a different approach to increase diversity. Rather than setting a direct requirement for diversity, NYSE adopted a market-based approach, focusing on the power of networks between diverse individuals. The NYSE launched its Board Advisory Council (BAC) in 2019 to address the need for diverse, inclusive leadership on public and private company boards. The 19-member council is composed of distinctive CEOs who leverage their extensive personal networks to identify talented and diverse candidates to recommend to NYSE-listed companies. This method is supported by a publication by Vell Executive Search, Inc. on gender diversity within boards of technology companies, in which researchers found that 92% of those board seats are filled through personal networks. In conjunction, Vell also found that women have less access to those networks. As such, expanding personal networks to match talented and diverse candidates with boards looking for new board directors will create deliberate progress. BAC networking events have resulted in over 500 meetings between 64 company leaders and 144 candidates to date. In addition to educational and networking opportunities for the board candidates, the council hosts a series of live events designed to connect diverse candidates to NYSE-listed companies seeking to diversify their boards.

Despite being hesitant to require board diversity like Nasdaq has, the New York Stock Exchange still considers board diversity a critical issue. In addition to the BAC, the NYSE intends to create an online database, reports Executive Vice Chairman Betty Liu in a Barron’s commentary article on February 5th, 2020. The database would be a directory consisting of all diverse candidates nominated by the NYSE Board Advisory Council and will be available to all NYSE-listed companies. The directory will carry the influence of the CEOs that nominated them as well as each candidates’ qualifications.

Overall, regardless of differences in method, both stock exchanges agree that diversity improves board performance and listed companies on either are looking to improve the diversity of their boards. Ultimately, for women and members of underrepresented minority groups, now more than ever is the best time to search for board positions.

The phenomenon of inflation warps myriads of aspects of corporate life, and perhaps most significantly the task of the compensation committee. As prices across the board skyrocket, budgets must be increased and compensation packages must be reevaluated.

In the current inflationary economy boards must advise based on the level and rate of inflation that the economy is suffering. As the prices for goods and services rise unchecked, wages across the country must be raised to meet expenses in order to maintain a healthy business and workplace. Boards must be prepared to react appropriately to such discrepancies in national economic health or risk disrupting the productivity of their company.

Most companies approve incentive plan targets within the first quarter of the year, so now is the time to consider how inflation will impact this year’s salary increases. Merit budgets had been at a steady three percent for the last 10 years or so; however, in 2022, the delivered merit budget increased to 3.4%, and for 2023 it is projected to be at 3.8%. This is crucial for board directors to consider when drafting incentive plans and advising for compensation packages. While it may be tempting to simply increase incentive opportunities, incentive plans can be riskier during inflationary periods and so smaller salary raises may be wiser. Slight complexities such as this pose opportunities for an inattentive board to misadvise and cause company decline during these times, but, as always, precarious moments also provide opportunities to succeed beyond competitors. As a board director it is important to recognize those moments when slightly more effort and communication may result in an advantageous level of preparedness.

During the times of uncertainty that multiple years of a pandemic have created it can be tempting to try and deduce certainty out of supply chain statistics and changing product value, but current supply chains are too intricate to be reliable. Incentive plans must be generated in response to the current economy, which is inflationary.

Today, supply chains are far too complex to predict the results of incentive plans or goals, which introduces the necessity of a well-informed financial director. This is one of the board’s primary jobs, for which it is vital to evaluate current economic data and draw judgements based on the best interest of the company. In sum, a good board consists of directors who take stock of the current economic environment and its quirks, for example inflation, and advise in response to it and in redistributing incentive plans and payouts.

As it nears the end of 2023, many of America’s top public companies showcase increasingly diverse boards of directors. Although there has been significant progress in expanding director appointments, to reflect many types of diversity, there is always room for improvement. Recently, the corporate sector has been overwhelmed by the impact of the pandemic, geopolitical shifts, environmental changes, and social justice movements, which have taken the country by storm over the past few years. Pressure from stakeholders and regulators for company leaders to acknowledge such events, and actually take a stance, is continuously increasing. Diverse boards are seen as better equipped to navigate complex, multifaceted issues, adapt to change, and sustain companies in the face of evolving global challenges. So, the search for more diverse perspectives in the boardroom continues, meaning that demand for diverse directors, with varied backgrounds, knowledge, and experience, are still on the rise.

According to the seventh edition of “Missing Pieces,” historically underrepresented groups, including women and Black/African, Hispanic/Latinx, Asian, Native American/Alaska Native, Native Hawaiian/Pacific Islander, or multiracial men, continue to make strides in the boardroom. In 2022, women held upwards of 30% of board seats in the Fortune 500, which marks about a 5% increase from just two years prior. The number of Fortune 500 board seats held by racial and ethnic minorities also saw about a 5% increase and now stands at 22.2%. 53 companies in the Fortune 500 have more than 60% of their board seats filled by individuals from historically underrepresented groups, the highest percentage in its history. Additionally, from the 2023 Spencer Stuart Board Index, 67% of all new directors, at S&P 500 companies, are from historically underrepresented groups and 48% of all directors are diverse, a 2% increase from 2022. These findings indicate progress, albeit at a gradual pace. At the current rates of increase, for diverse board membership, it will take several decades for America’s leading corporate boards to truly reflect the diversity of the actual population.

In recent years, overwhelming amounts of evidence have come out showing the improvements that board diversity makes on performance and leadership. Expanding the boardroom to be more diverse and inclusive often increases financial returns and improves corporate reputations. Diverse boards are also associated with stronger risk management and strategy planning. Positive effects, such as these, serve as strong incentives for investors to actively seek out boards that prioritize diversity. With the increasing value of diversity, board selection should address existing gaps in the board’s makeup, keeping gender, age, race, and ethnicity, but also professional experience, in mind. By setting goals to fill these gaps, boards gain diverse perspectives and are able to contribute to many aspects of organizational success and financial effectiveness. It’s important for board members to align themselves with the interests of the groups they represent, to ensure the board is held accountable to satisfying the diverse needs of these groups. If boards are diverse, they make better decisions, which keeps these groups engaged. Informed decision-making is necessary to keep internal matters at bay, keep up with market trends, and maintain healthy public relations. This will also maintain the sustainability and long-term success of the board and strengthen stakeholder trust, as investors want companies to be socially responsible and have diverse employees. Keeping this in mind, it is often most beneficial for companies to focus on prioritizing what is in the best interest of investors and the public.

The demand for board diversity and recognition of its importance continues to grow, and many legislative measures have been implemented to ensure increased diversity within public companies. The U.S. Court of Appeals for the Fifth Circuit recently upheld Nasdaq’s board diversity rule, originally approved by the U.S. Securities and Exchange Commission in 2021, which requires Nasdaq companies to have a minimum of two diverse directors, including at least one woman and one individual from an underrepresented minority or self-identifying as LGBTQ+. Despite resounding support for board diversity and its benefits, there has been some concern over the Supreme Court’s landmark affirmative action ruling. While this ruling only specifically ended race-conscious college admissions, Justice Neil Gorsuch has insinuated that it should and will apply to the hiring process of employers wanting to hire diverse employees. Regardless, stakeholders appreciate diversity in the boardroom, as organizations that prioritize diversity are seen as more resilient, innovative, and socially responsible. Embracing board diversity is a moral imperative, necessary for business success. If companies continue to build more diverse boards, it shows further progress in addressing the complexities of a diverse world.