The economy may be crawling along, but compensation for corporate directors continues to ramp up, outstripping average wage growth, according to a new report from the Ottawa-based Conference Board of Canada published on Thursday.
Average compensation for directors of publicly traded companies continues to grow, the report says, coming in at $136,506 for 2014, up from $128,851 in 2012.
Big companies pay their directors the most, the report notes, with directors at large firms enjoying average annual compensation of $156,374.
However, small companies are paying directors more than medium-sized firms, according to the report. Average compensation for directors at small firms came in at $126,893, versus $118,796 at medium-sized companies.
Average annual compensation for board chairs was $257,848 for 2014, the report says, and Canadian organizations paid an average of $1.6 million to their boards in 2014.
“By industry, the communications and telecommunications sector pays the highest annual total fees to its board of directors while the manufacturing and construction industry pays the lowest average fees,” the report says.
Looking ahead, the Conference Board expects director pay to continue trending higher, the report notes. “Despite the recent economic downturn, we expect director compensation to continue to increase at a pace faster than the economy or worker wage growth,” says Lynn Stoudt, vice president, leadership and human resources research at the Conference Board, in a statement.
However, she notes that directors are facing increased demands, too. “This reflects the increasing level of professionalism required of the director role, and the ever-increasing scale and scope of director responsibilities,” she adds.
Board diversity
Boards are increasingly independent, the report says, but that gender diversity is still improving very slowly. I Eighty-six percent of firms now separate the chair and CEO roles, according to the report, and more than three-quarters of directors are considered independent from management.
However, firms still have a long way to go on gender diversity. Canadian boards were only 16% female in 2014, up from 13% in 2012, the report says. As well, only 38% of boards have more than one female director.
“This slow progress on board diversity can be explained in part by the lengthy tenure of directors (an average of nine years) and the lack of retirement policies for boards in Canada. These factors result in a gradual pace of change,” the Conference Board says in a statement.