Q&A: Do Board Members Get Paid?
Usually, board members receive a base retainer, as well as other forms of financial compensation and benefits.
Looking to join a board of directors?
There are dozens of factors to consider before accepting a board seat. But what matters most is whether the board will pay you as an independent board director. You don’t want to join a board expecting financial compensation only to find out members don’t get paid.
We’ll dig into the big question: do board members get paid? Specifically, how much can you expect, payment options for board members, and the factors that determine pay.
Let’s dive in.
Do Board Members Get Paid?
Board members usually get paid for their services, but the exact amount each member receives depends on several factors. According to Indeed, the average board member salary in the U.S. is about $84,911 per year. Typically, board members receive a retainer fee for their services instead of an hourly wage. Other compensation options board members receive include:
- Stock options: With this compensation option, the company allows board members to buy and sell shares at a discount or fixed price rather than the true market value. The organization usually sets a deadline for buying and selling these shares.
- Stock grants: The company gives board members a particular number of shares in its stock for free. Stock grants usually have restrictions designed to keep board members working for the organization. For example, the organization can set a specific time frame after which a board member owns the free shares. If the member leaves before the period elapses, they lose the grant.
- Reimbursements: The organization compensates board members for out-of-pocket costs they incur for serving the board. For example, a company can reimburse directors for board meeting expenses like traveling and hotel reservation costs.
- Liability insurance: This compensation covers board members against claims and lawsuits. The board makes decisions in the best interests of shareholders and the company while complying with industry regulations. Liability insurance protects them from legal claims alleging misconduct or wrongdoing.
What Factors Influence Board Members' Pay?
Board member compensation depends on the following factors:
- Size of the organization: A multi-million dollar organization may offer board members cash compensation because of a steady revenue stream. On the other hand, startups will likely offer them stock options because the companies have huge growth potential. Stock options also reduce the startup’s cash spending.
- Public vs. private organizations: According to Harvard, Equity makes up a huge portion of the total compensation of directors in public companies—generally more than half of their pay. Private organizations do not normally offer equity pay to board members, but they sometimes compensate for this by providing higher cash retainers than public companies. Most public company members receive equity and cash compensation.
- For-profit vs. nonprofit: Nonprofit board members usually serve as volunteers. They often don’t get salaries but may receive reimbursements for attending meetings. On the other hand, for-profit organizations compensate board members through retainers or other financial benefits.
- Industry or vertical: Board member compensation varies widely in sectors because there aren’t specific requirements. The differences occur because standards and roles vary in every industry.
Frequently Asked Questions (FAQ)
How Do You Make Money as a Board Member?
Board members make money through cash and stock awards, which include retainers, meeting attendance fees, and extra retainers for executives. Compensation may also come in the form of stock options, grants, and other financial benefits.
How Much Do Board Directors Get Paid?
Board directors are paid differently depending on the position on the board, the committees they serve, and whether they serve in a public or private company. The company size also matters. However, here’s what statistics say about a board director’s paycheck in the U.S.
According to Reuters, a director’s salary today is 43% higher than it was over a decade ago. Reuters’ insights show that an independent director at a S&P 500 company receives total compensation over $300,000 annually. Veritas research reveals that a board member’s annual payment on high-paying boards can reach $500,000.
According to Google’s 2021 proxy statement, the tech and search engine provider paid each non-employee director an annual cash retainer of $75,000 and a $350,000 stock grant. The board chair got an additional $25,000 cash retainer and an additional $150,000 yearly stock grant. The audit and compliance committee chair got an additional $25,000 annual cash retainer.
Apple’s 2020 proxy statement revealed the mobile tech giant pays each non-employee director a yearly cash retainer of $100,000 and equity awards of about $250,000. The board chair gets an extra $200,000, while the audit committee chair receives an additional $35,000 on top of the cash retainer.
Do All Board Members Get Paid the Same?
Board member compensation in the same organization varies on each person’s role on the board. For example, a member serving on different committees may receive more than members not on committees. Similarly, a director who chairs the board gets a bigger paycheck than all other members.
As you’ve seen in the section above, Google’s board chair receives the highest compensation, followed by directors serving a committee, then regular board members. Typically, your role on a board determines your compensation
However, some companies don’t offer retainers for serving on a committee or provide meeting fees. Without these compensations, a board member serving on multiple committees gets paid the same as a member serving on a single committee. Therefore, the board bylaws also determine if all board members are paid equally, or based on their role.
Before joining a company, check its annual proxy statement to determine the compensation. You’ll also discover what the organization looks for in a board member to ensure you check all the boxes for your desired position.
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About The Author
- Josh Palmer serves as OnBoard's Head of Content. An experienced content creator, his previous roles have spanned numerous industries including B2C and B2B home improvement, healthcare, and software-as-a-service (SaaS). An Indianapolis native and graduate of Indiana University, Palmer currently resides in Fishers, Ind.
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