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What Is Board Remuneration?

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  • Written By: Geri Terzo
  • Edited By: Shereen Skola
  • Last Modified Date: 18 November 2016
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    Conjecture Corporation
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Many companies have a board of directors, generally made up of about a dozen individuals to provide an external, subjective perspective on the direction of that business. Most often, board members are not employees, though members are typically experienced professionals in the industry for which they are serving on a board. These representatives do not often provide their services for free, and a board remuneration is the compensation model that they receive in exchange for their responsibilities. The pay is typically a yearly salary that may be disclosed to the public in regulatory documents.

Board remuneration can be generous, and members might rely on this compensation as a major component of their income. Publicly traded companies may come under considerable criticism for the way that these individuals are paid, especially if the business is troubled. Large investors holding sufficient equity stakes in a business who are not satisfied with a particular board member's contribution or expertise could initiate a replacement process for that official. This behavior could become especially contentious when coupled with an expensive remuneration package earned by the board representative.

Professionals might reside on the boards of multiple different businesses. Subsequently, these individuals could receive multiple board remuneration packages. In exchange, the members are expected to provide governance by voting on major company developments and liaising with top corporate executives.

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Highly sought-after board members are likely to receive the most attractive of board remuneration deals. It is common for the value of the pay to be expressed in some type of financial retainer. Retainers could be a flat fee that a company pays these members and could increase based on the number of committees in which the outside representative participates. The entire retainer is usually a yearly amount and recipients may have some discretion in the schedule and manner of distributions.

Companies often design board remuneration offers to reflect the value that outside representatives have to offer as well as the creativity and resources at the organization. In addition to cash, a board representative might be offered equity shares in the company. This type of compensation package also creates an additional tie to the company's performance because the higher the market value of a stock, the more profitable the member is likely to become. In order to protect against any inappropriate behaviors, companies often set policies that are meant to prevent any conflicts of interest between board members and corporate events.

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