Director compensation packages generally include an annual retainer, per meeting fees and annual stock options or stock grants. Annual director remuneration has steadily risen due to the complexity of board governance and increased regulation.
Usually, a figure equivalent to 20-25% of the retainer is used to determine the amount of stock options paid to a director. They function as incentives to encourage directors to be more malleable during potential takeovers and acquisitions. However, stock grants are becoming a more popular option.
An example compensation package consists of a cash retainer of $90,000, a $1,500 per board meeting fee (average 8 meetings per year for a total of $12,000) and a stock grant of $22,500, totaling $124,500 in annual board remuneration. Given the average board tenure of 8.6 years, this example affords a comfortable $1.5 million annuity over the course of a typical governance expectancy.
Board members may also receive additional compensation for serving on multiple committees, committee chairmanship and special projects. Expenses and travel fees are generally reimbursed, as well.