How to work with and leverage the board of directors was a universal theme discussed among CEOs and private equity partners. EY & Citi On The Importance Of Resilience And Innovation, Impact 50: Investors Seeking Profit — And Pushing For Change, Gender Bias: Trademark Act Never Contemplated A Woman Or Gay Male President, Cannabis Challenges Differ In Each State Where It’s Newly-Legal, 5 Unexpected Places To Find Your Next Great Business Idea. You can gain access to thousands of data points across hundreds of private equity firms in the WSO Company Database. Private companies tend to target their non-employee director pay at around the median of total cash compensation (excluding equity retainers) of publicly-traded companies. The final step. Similar to last year, 21% (22% in 2018) of respondents reported using equity as part of their compensation schemes. After a strong 2018, Financial Services and Utilities/Energy/Industrials firms slowed their growth in 2019. They have limited time and will be serving as a favor to you, to help you get your business started. The U.S./International compensation spread has widened to $10,600 (US directors now earn 29% more than their international counterparts). But what about non-investor board members? Finally, Marissa is a Leadership columnist for Inc. Magazine. ‘Booking.com’ Is A Trademark – Does This Matter To Your Business? Private companies recognize the value that board members bring to the table; however, only about 20 percent of the private companies surveyed provide long-term incentives to their board members in the form of phantom equity, cash multi-year incentives or actual equity grants, such … “Senior Partners” will earn more if the firm makes the distinction. Opinions expressed by Forbes Contributors are their own. We have seen a steady increase in director pay since 2013. For the second year in a row, the growth in total compensation was primarily driven by U.S. companies, particularly $50-$500m. Our team will review your remarks prior to publishing. Boards continue to have a strong impact on company performance. Private companies generally compensate independent directors with cash and/or a small amount of equity, either on a one-time or annual basis (or, sometimes, both). Public company board of director positions can receive seven-digit compensation. Year on Year Growth In Total Compensation By Industry. Total compensation assumes 4 in-person meetings. Median pay for non-management partners is up from $290K last year. Ways Entrepreneurs Can Stretch Their Capital, 2 Million Professionals Polled On How To Make Virtual Conferences Better— Here Are Their Top 10 Hacks. However, directors on private equity-owned company boards are expected to be much more active than in a public company, often blurring the line between management and oversight. Similarly, given the large equity component, total compensation for public company directors ($170,000) dwarfs private company director pay of ~$43,500. The decline in manufacturing and retail also seems correlated to the economic weakness in those segments. Marissa is the author of the #1 best-selling book “Built to SCALE: How Top Companies Create Breakthrough Growth Through Exceptional Advisory Boards.” Using Marissa’s patented SCALE Model, Lodestone Global helps CEOs select and implement highly effective advisory boards which is an essential strategy for any business looking to grow exponentially. There is a much greater focus on the commercial side of the business rather than governance. It is very common that the majority of the board directors are principals in the private equity firm. We saw broad based strength across many industries/sub-industries likely commensurate with where we are in the current economic cycle. Marissa Levin’s entrepreneurial journey began in 1995 when she launched Information Experts, a strategic communications and education firm. Without at least one disinterested director (and better to have two), the legal risks can be high. In general, private company director compensation programs lack equity awards to the same extent that private company executive pay programs lack equity awards. Technology firms rebounded to the top spot driving compensation growth after a weaker 2018. In most privately-held businesses, the level of board member risk is not as great as it would be in a public company. Even though this person (or people) will be paid a salary, all of the same benefits of equity compensation—including both rewards and incentives—apply to them as well. Benchmarking Board of Directors Compensation at Private Companies . All Rights Reserved, This is a BETA experience. At the other end of the spectrum, a startup company more likely can offer options for compensation. © 2021 Forbes Media LLC. Comparing to the 2019 BDO 600 survey, private companies seem to be increasing their remuneration programs faster than their public company counterparts, albeit by a small margin (+5% vs. +3% ). When board members are also investors in a company, their motivation is fairly clear: The better the company performs, the better the return on their investment. As private company governance grows in importance, perhaps director talent and compensation will also increase. As both board member and member of a PE firm, the director is privy to information … As you can see from the chart, directors earned a $31k retainer, $2,750 per meeting and $750 per formal teleconference. Domestic compensation grew another 6% year on year, after growing 10% last year. Lodestone Global recently published their 9th Annual 2020 Private Company Board Compensation Survey. The people you will ask to serve on your company's board of directors are busy people, with their own businesses. Compensation of nonemployee directors is a critical element in the overall governance of any company. Despite the increase, private company director retainers of similar size companies remain only ~44% of their public company director peers ($31,000 vs. ~$71,000). She was named as one of Washington’s Top 100 Technology Titans for 2009 by Washingtonian Magazine and was a finalist for the Ernst & Young Entrepreneur of the Year Award. As a result, private company board members usually receive lower retainers than public company directors do. Only outside directors get compensation specifically for serving on the board. Equity compensation is the practice of granting partial ownership in a company in exchange for work. Jeremy Goldstein, partner at law firm Wachtell, Lipton, Rosen & Katz, wrote on the Harvard Law School blog in 2011 that increased regulatory requirements were making it difficult to retain and recruit qualified directors. For the fourth year in a row, total compensation for these schemes were paid roughly half cash and half equity. Most public company directors receive a combination of cash and equity compensation, with equity making up at least half of total pay regardless of company size or industry. This may reflect the strength of the U.S. markets, both in terms of employment and equity market valuations. The transportation and logistics industries gave the top board compensation packages. Private Equity Managing Director Salary + Bonus: Compensation here is highly variable, but a reasonable range is $700K to $2 million, with slightly less than half from the base salary. Marissa is a 28-year entrepreneur, speaker, & globally recognized growth strategist, Marissa’s lifetime legacy mission is to educate, equip, & empower 100 million entrepreneurs & leaders with the skillsets and mindsets they need to reach their greatest potential. Outside director compensation must be competitive to attract well-qualified individuals. Private companies therefore While board sizes vary depending on the private equity firm, as does the number of independent directors, we are seeing a few trends in portfolio company board governance, including: Board committees, especially audit and compensation committees, often with independent directors as the committee chair. compensation for Board service equity compensation for Board service committee compensation non-executive Board chairs and Lead Directors stock ownership Guidelines and retention requirements compensation Deferrals annual Limits on Director compensation • Companies in all size segments continue to provide more than half of total pay in equity, on This is not a critical factor for choosing a board of advisors over a board of directors or vice versa. Despite the increase, private company director retainers of similar size companies remain only ~44% of their public company director peers ($31,000 vs. ~$71,000… When was the last time you analyzed how much you should pay your board members? Board compensation for directors of large U.S. companies just passed a new threshold — $300,000 per year in total fees — up 3.5% according to a new study by Compensation Advisory Partners. For early stage companies where director compensation is 100% equity, a typical initial allocation for an: outside director might be 1.5 to 2.5% of the outstanding shares, and active Chairman might be 5 to 6% of the outstanding shares depending on the amount of additional time contribution, calculated around the end of the third round. The median pay mix of companies studied was 58 percent equity and 42 percent cash. Compensation is important because an engaged and experienced board adds value to a company. However, there is still some level of risk and an expected time commitment for which board members must be compensated. For more content related to private company and investment firm compensation, check out other articles we've published with J. Thelander Consulting. Throughout her 25-year entrepreneurial journey, Marissa has been recognized as a global influencer and trailblazer. Private companies tend to struggle with board compensation because it is difficult to find accurate benchmarks for director pay. Companies are also paying an average of $2,250 per meeting and $1,000 per telephone conference, for a total annual compensation of about $36,000 per year. In 2011, she was one of the first honorees to be inducted into the SmartCEO Hall of Fame for outstanding and exemplary women’s leadership. Confidentiality. Managing Director (MD) or Partner: 36+ $700-$2M: ... By contrast, private equity compensation is more difficult to explain. Generally speaking, earlier stage startups carry with them … A mid-career Private Equity Director with 5-9 years of experience earns an average total compensation (includes tips, bonus, and overtime pay) of $132,453 based on 12 salaries. Introduction 9 minutes, 5 links. All rights reserved. The private equity (‘PE’) landscape is of significant importance to the UK economy, with PE investment in the UK exceeding € 27 billion in 2017, nearly double the figure we saw deployed in 2016 1. In 2012, she launched Successful Culture, a leadership consulting organization that helps CEOs master the 3 most critical aspects of business growth: leadership development, strategy formulation & execution, and organizational culture assessment & improvement. *Note: all figures are in USD, the data represents median values and assumes 4 in-person and 2 teleconference meetings. As a result, you should know a few things about a board of directors and what kind of compensation is expected. Business size, industry, structure, complexity, the number of yearly meetings are just a number of variables you have to consider when setting your board remuneration programs. FMI’s survey results show that fewer than 5% of contractors provide any compensation to inside directors. How do you know if you are paying too much or not enough? Inside directors, such as C-suite level executives, don’t receive additional compensation. You may opt-out by. While they may have interacted with boards in prior roles, reporting to and working with a private equity board requires development of an entirely new set of … Marissa holds a Master’s Degree in Human Resources Development & Organizational Development, is a credentialed coach certified by International Coach Federation (ICF), is certified in Instructional Systems Design, and is a Certified Mastermind Facilitator. Once your core founding team has determined its appropriate equity allocation, you are all set, until the time comes to hire the company’s first non-founder employee. 2020 Private Company Board Compensation Survey. © 2021 PitchBook Data. These schemes tended to target a specific value of the company or shares outstanding. She was named as a 2009, 2010, and 2011 SmartCEO Smart 100 participant by SmartCEO Magazine, which recognizes the top 100 CEOs in the region, and was named as a 2008 BRAVO Award winner, which honors the region’s 25 most influential women CEOs. While there are multiple reliable sources of information on non-employee director pay at publicly-traded companies, data on non-employee director pay at private companies—both for profit and nonprofit—is more difficult to come by. Marissa was also named as one of greater Washington’s “Women Who Mean Business” by the Washington Business Journal, which honors the region’s “most influential and powerful” women executives. It is very unusual to provide compensation to inside directors for their board participation (as opposed to their employment with the company). Many companies that are controlled by a single stockholder or affiliated stockholder nonetheless have significant minority investors. When offering option-based compensation consider the following: Well-designed compensation not only helps to align the interests of shareholders and directors but also provides value to directors for value received. SCI also works with emerging companies to help define their corporate cultures so that they can attract, hire, and retain the best talent. Also in 2017, Marissa merged Successful Culture with PeopleTactics, a national leader in Strategic HR Consulting to launch Successful Culture International (SCI), a global corporate culture consultancy that leads organizations undergoing significant transformation through a proven model to define, stabilize, and strengthen organizational cultures. Is It Time To Change Director Board Compensation In Private Real Estate Firms? If you have additional questions on Compensation … Marissa is a 28-year entrepreneur, speaker, & globally recognized growth strategist, Marissa’s lifetime legacy mission is to educate, equip, & empower 100 million. This is particularly common in private equity-backed companies where the lead private equity fund may have partnered with another fund that takes In its ideal form, equity compensation aligns the interests of individual employees with the goals of the company they work for, which can yield dramatic results in team building, innovation, and longevity of employment. The median annual board cash retainer was $55,000. The board model employed by private-equity firms could better serve publicly traded companies — especially when it comes to defending against activist hedge fund campaigns, new research shows. Lodestone Global is a specialized consulting firm providing strategic guidance to chief executives of private and family controlled enterprises, who are considering forming or refreshing a board of directors. *Note: Survey respondents self-selected their industries, which we bucketed for comparison purposes to prior surveys. Private companies generally compensate independent directors with cash and/or a small amount of equity, either on a one-time or annual basis (or, sometimes, both). The Stage of Development. Here's the link to the 2017 investment firm survey. The table above is an example of private equity salaries at various levels of seniority. Overall, there has been little change in board compensation over the last few years, as well as the percentage balance between cash compensation and equity (typically 45% and 55% respectively). Includes Median retainer, per meeting, and excludes telecon. In this article we examine the results of our most recent research that highlights how much board members should receive in compensation. We continue to hold the thesis that mature private companies do not use equity as a key element of their board compensation programs. The survey reported that the average board of director compensation is $25,000 for a retainer. Large-cap companies in our study pay directors $274,000 at the median, and experienced the greatest increase in median total pay this year of 5.4%, rebounding from flat compensation the past two years. Full Private Equity Industry Report. Under her leadership, the company won more than 80 awards for creativity & leadership, was named to the Inc. 5000 List of America’s Fastest Growing Companies for 2009, 2010, and 2011, won the 2010 SmartCEO GovStar Industry Star Award, and was known as a trailblazer in establishing an extraordinary employee-centric culture that fully supported work-life integration and a core value of "responsible flexibility.". Contact info@lodestonglobal.com for latest 2019 Private Company Board Compensation data. The survey included 375 companies across 33 different industries and 38 countries to analyze current board practices and compensation around the world. In 2017, she co-founded Women’s CEO Roundtable, a professionally facilitated year-long program for women business owners from noncompeting organizations that are committed to scaling beyond $1m in revenue. She launched her firm as a solopreneur with a $35,000 contract and led/grew the organization to approximately $15 million in revenue until she resigned in 2012. If you have just landed on this site and don’t know what “private equity” means, start with our private equity overview and private equity career path articles. She is also the regional Chair for Women Presidents Organization, an international community of multimillion dollar women business owners, for whom she facilitates monthly CEO roundtables. PitchBook is a financial technology company that provides data on the capital markets. Private Equity Salary and Bonus Data by Position. And click here to contact J. Thelander Consulting. Lodestone Global also offers custom tailored board compensation analysis. Global also offers custom tailored board compensation programs lack equity awards to the 2017 investment survey... Earn 29 % more than their international counterparts ) was 58 percent and. 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