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13 May 2020 | Press Release
Report: Changing Business Needs Will Drive Next Level of Innovation in Director Compensation
To help inform discussions on board director compensation structure and process, organizations can turn to a new report and online dashboard. Both products were developed by The Conference Board in collaboration with Semler Brossy and data analytics provider ESGAUGE.
Made available to the public, the online dashboard provides a comprehensive set of benchmarking data and analysis. It features the most recent corporate disclosure by Russell 3000 companies, including individual elements of compensation packages, supplemental compensations for committee service and leadership roles, stock ownership and retention policies, pay limits, and deferred compensation schemes.
The data and insights come at a time when the responsibilities of corporate directors are changing radically in response to immediate business challenges and longer-term evolution in the balance between shareholder and stakeholder priorities. Board experience and activity must encompass a broader range of skill sets to help address these challenges. Companies will likely rethink some aspects of their director compensation policies to identify and compete for desirable candidates – including those from younger generations not currently serving on Boards – and to encourage continued professional development of existing directors.
Additional insights in the new report – driven by data curated from the dashboard – include:
Director compensation increases are likely post-pandemic. Board service and specific expertise at the committee level will drive these increases.
New director compensation program features may be a valuable tool to recruit new, often younger, qualified candidates to boards, and to support the ongoing development of existing directors. In general, companies could consider:
“As companies face competition for top talent to their boards, they will want to consider fresh and innovative strategies on the compensation front,” said Matteo Tonello, Managing Director of ESG Research at The Conference Board. “Rather than shy away from such pursuits, they should be creative in structuring their compensation program in a way that not only attracts these directors, but also serves the company’s and shareholder interests. Along with providing for appropriate safeguards to preserve director independence and alignment with shareholder interests, companies should ensure that their market disclosure thoroughly describes the rationale for adopting diverging practices and adequately documents the difficulties around attracting the best and brightest in key areas of board expertise.”
“The evolving debate on corporate purpose, ESG, and HCM is increasing the oversight required by Boards and is expected to have long-term impacts on director compensation,” said Mark Emanuel, Managing Director at Semler Brossy. “Three long-term trends will influence future director pay design. First, the expanded board mandate will continue to fuel the low- to mid-single digit average annual increases in director pay levels we have seen in recent years. Second, board communication with external stakeholders on broader topics may drive larger increases in leadership pay. Finally, committee pay levels may change to reflect demand for directors with skills and experience in ESG and HCM matters.”
“Given the renewed focus on director pay from both proxy advisors and investors highlighted by the report, any changes to director pay – both to the structure and to the levels – will be acceptable as long as they are clearly explained and the rationale behind them is reasonable,” said Paul Hodgson, Senior Advisor at ESGAUGE Analytics. “While there has been a great deal of homogenization of director pay packages, neither investors, nor their advisors, are inherently against companies taking innovative approaches that can be seen to enhance long-term value and reduce risk.”
Media can contact The Conference Board for a copy of the report and for guidance on using the online dashboard.
About The Conference Board
The Conference Board is the member-driven think tank that delivers Trusted Insights for What’s Ahead®. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.conference-board.org
About Semler Brossy
Semler Brossy is a leading independent executive compensation consulting firm. We serve a broad cross-section of companies across industries, from the largest global corporations to smaller, privately held firms. We partner with Compensation Committees and management teams to develop and apply compensation solutions to support corporate strategy and ensure sound governance. Clients trust our experience and foresight to help them turn Complexity into Clarity in compensation and governance. www.semlerbrossy.com View our Covid-19 resource page: www.semlerbrossy.com/covid-19
About ESGAUGE Analytics
ESGAUGE Analytics is the intelligence platform and help desk uniquely designed for the corporate practitioner and the professional service firm seeking customized data on U.S. public company disclosure of environmental, social and governance (ESG) practices. Our clients include business corporations, compensation consultants, law firms, accounting firms, and investment companies. We also partner on research projects with think tanks, academic institutions, and media companies. ESGAUGE Analytics intelligence is tailored to specific empirical information needs, with segmentations by select peer groups, business industry, and multiple company size dimensions. Data insights are tagged and hyperlinked to underlying sources. www.esgauge.com
Media Contact:
Joseph DiBlasi
jdiBlasi@tcb.org