Canadian Director Compensation: Privately Held vs. Publicly Traded
Through our new Private Company Director Compensation Survey, Compensation Governance Partners (CGP) has started to fill a gap in market compensation data. In this article, we will contrast data from our survey of private companies with public company director / trustee compensation.
Generally, it is more difficult for privately held organizations to benchmark director compensation, as privately held organizations are not required to publicly disclose compensation for its directors. To better understand the private director compensation market, CGP conducted a survey on director compensation during the summer of 2020.
By contrast, disclosure of director compensation at publicly traded companies is required in management information (proxy) circulars. Typically, director compensation is composed of a combination of cash retainers, equity retainers and meeting fees. When benchmarking, these organizations create peer groups of other publicly traded companies and analyze their data to determine competitive director compensation levels.
In the observations below, we compared director compensation among selected TSX 100-300 companies of comparable size to our survey population (revenues of less than $250 million). We show the premium that public companies pay compared to all private company boards and the subsets of advisory boards and governance / fiduciary boards.
Annual board cash and equity retainers
Public companies pay larger retainers than private companies, with roughly 40% - 60% higher cash retainers. The difference between public companies and governance / fiduciary boards is much smaller (10% - 30%) than for public companies and advisory boards (90% - 140%). We theorize that the different level of fiduciary responsibility and hence legal liability at a governance / fiduciary board would drive higher pay compared to advisory boards.
Equity-based retainers are more common among public companies, with 70% of public companies providing them compared to 20% of private companies. Private companies are more likely to use options or stock awards when compensating directors while public companies typically use deferred share units (DSUs), restricted share units (RSUs) and options. Pragmatically, it is more difficult for private companies to use share capital as a compensation vehicle which likely accounts for the decreased prevalence of share-based compensation.
Meeting fees are similar for public boards and private boards, typically $1,500 per meeting, where offered. We note that 55% of public and private companies analyzed do not offer meeting fees. In addition, providing a retainer with no additional meeting fees, also known as an “all-in” board retainer, is more common among the entire TSX 100-300 compared to this sample.
Additional committee retainers
Public company committees pay more in general compared to private company committees, and we also note that private companies pay their committee chairs only slightly more than committee members. Public companies typically pay committee chairs between 50% - 150% more than committee members, while private companies typically pay chairs between 0% - 100% more than members.
Board and committee composition
Public company boards tend to be slightly larger, with older and longer serving directors than private company boards while also meeting more often. Private companies tend to have more women on their boards; however, we note that when looking at the entire TSX 100-300, public company boards and private company boards have a similar representation of women, with an average of 2 women per board.
All public companies have committees while only 69% of private companies have committees, with Audit / Finance and Human Resources / Governance being the most common committees for both private and public companies. Public companies typically have more committees than private companies, but also have smaller committees that meet less often.
Summary
As expected, public companies pay more than private companies, but private companies have other subtle differences ranging from type of compensation to board and committee composition.
If you wish to purchase a standard or customized report of our Private Company Director Compensation Survey results, please contact Matthew Tripp at 647-484-7222 x140 or mtripp@compgovpartners.com.
Compensation Governance Partners aims to provide you with up-to-date executive compensation information and trends, via our annual proprietary compensation database (composed of job-sized executive roles from over 200 organizations). Please contact info@compgovpartners.com or click here for more information.
Authors
Matthew Tripp, Senior Consultant
→ mtripp@compgovpartners.com
Marlene Georges, Principal
→ mgeorges@compgovpartners.com