Under SEC rules, public companies are required to disclose board compensation.
But private companies don’t face the same regulations.
This lack of visibility makes it challenging for compensation leaders to benchmark and pay independent board members. So we surveyed private companies to understand how they structure cash and equity compensation for board members.
Here, we’ll explore some of the findings.
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What Is a Board of Directors?
At private companies, the board of directors provides insights, governance, and strategic guidance. This group fills in knowledge gaps and helps the organization by:
- Overseeing and coaching executives
- Assessing and reviewing the budget and financials
- Identifying talent gaps and skills needed
- Developing a risk management strategy
- Helping backfill executive positions
However, there isn’t a one-size-fits-all approach. The board’s responsibilities vary based on the company’s size, industry, and growth stage.
The same is true for board size. Typically, early-stage organizations have fewer people on the board, and as a company grows, so does the board of directors. Most companies have an odd number of board members to avoid tie votes. Boards often include the CEO and CFO, as well as independent directors like investors and industry executives.
Do Board Members Get Paid?
Typically yes, board members get paid—but cash compensation for board members is uncommon at private companies.
Our data shows that few organizations offer compensation in the form of cash to board directors, and that even applies to the independent board chair.
- 20% offer independent board members an annual cash retainer for their service, with a median payment of $50,000
- 6% provide meeting fees to board members, with an in-person cash median of $1,200
- 14% give independent board chairs an additional cash retainer, with the median being $20,000
However, it’s a different story for equity compensation.
When it comes to compensating board members, equity is much more common than cash. Private organizations use equity to reward board members and ensure they’re invested in company growth.
Pave’s survey found that:
- 73% of companies offer equity compensation for general board service
- 95% provide equity at initial appointment
- 29% offer refresh equity compensation
The most typical initial stock options for board members have a 4-year vesting duration, no cliff, and a monthly vesting schedule.
Here’s a closer look at the most common vesting durations and cliff structures for initial appointment and refresh grants.
How is a Board of Directors Structured?
Most private companies separate the board into committees, and each is responsible for a specific function.
At early-stage companies, some of these committees are combined. For example, audit and finance are often a single group. Then, as a company grows, so does the complexity of the board.
Our survey data shows that most private companies have an audit and/or compensation committee, but finance, risk, and technology are less common. Though, as noted above, some organizations may combine these groups.
Specifically, 45% of companies surveyed have an audit committee, and 48% have a compensation committee.
Get Your Compensation Questions Answered
To unlock all the results from our board of directors survey, join Pave Data Lab.
Once you’re in, you’ll also be able to explore data on topics like AI and ML compensation trends, unvested equity holdings by tenure, job level distribution by function, and much more.
We’re building a community of verified compensation and total rewards leaders, and we hope to see you there.
Jess is a content strategist and writer with a passion for helping small and mid-sized B2B companies tell great stories. Outside of work, Jess is an east-coaster turned west-coaster, a yoga teacher, and a fan of bad reality TV and good food.
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