Developing a Board Compensation Plan
An integral part of selecting and retaining board members is making sure that their compensation is in alignment with their value to the company.
At Cardinal Board Services, we help company boards review their current board compensation packages and provide input based on industry trends and the responsibilities of each board member.
Our goals for compensation alignment are as follows:
- Attract the highest caliber board candidates
- Align directors with shareholder interests
- Compensate directors accurately for their involvement and responsibilities
Ensuring that your board of directors’ compensation is fair is vital to the success of your board. Retaining the best board members will keep your company in the hands of the most capable professionals. Your compensation plan must be in line with industry trends, the compensation plans of your competition, and the roles and responsibilities of the members.
A variety of factors play into the optimal compensation that works best for both your board members and the company. They include, but are not limited to,
- Market Competitiveness: Board compensation should be competitive with similar-sized companies in the same industry.
- Roles and Responsibilities: The level of compensation should reflect the level of responsibility and complexity of the board’s role.
- Performance-Based Incentives: A portion of board compensation can be tied to the company’s performance, such as stock options and/or bonuses.
- Independence and Alignment with Shareholders: Board compensation should align the interests of directors with those shareholders.
- Legal and Regulatory Compliance: Board compensation should comply with any & all applicable laws and regulations.
- Long-Term Perspective: Board compensation should be designed to promote long-term value creation for the company and its shareholders.
Furthermore, there are many methods of compensation to consider and regulatory hurdles that may apply to your business.
Don’t make the mistake of developing your own board of directors compensation plan. Having an unbiased third party recommend the ideal amount and means of payment will correlate with a more stable board. As you probably already know, a stable board means a stable company. Shareholders and investors are more confident in the direction of the company when they see consistency in your corporate governance.
Contact Cardinal Board Services today to begin the process of navigating the complicated waters of board compensation. We will work together to implement the best compensation plan for your board.