Earlier this year, we completed our annual Private Company Board Compensation and Governance Survey with our partner, Compensation Advisory Partners (CAP). The survey is the nation’s largest study of private company board compensation practices. In this issue of Private Company Director, CAP’s Bonnie Schindler details some of the study’s key findings, including median director compensation. At our recent Private Company Governance Summit, speakers and participants noted how valuable their boards have been during these very challenging times and the survey brought to light how much time directors spend on board work.
Since the outbreak of COVID-19, many boards increased the frequency of (virtual) board meetings and calls. The boards on which I serve shifted from quarterly meetings to much more frequent calls. In the second quarter, many of these sessions were weekly, coupled with a few executive sessions and one-on-one conversations with individual board members. We focused not only on ways to meet the near-term challenges but also on the longer-term repositioning of products and services required to succeed in the years to come.
I found the additional meetings and calls valuable, though admittedly a significant time commitment. In this year’s survey, over half of respondents estimated they spent fewer than 50 hours on board work and only an additional 10 to 20 hours on committee work, which was surprising. However, while the survey covers a number of months pre-COVID-19 as well as three or four months into this “new normal,” anecdotal evidence indicates there has been a marked increase in time devoted to board work since the outbreak. I believe this will not be just a one-time uptick. Ultimately, the expectation for directors in 2021 and beyond may be more board meetings, more calls and more time spent on preparation.
But more than the significant amount of time devoted to board work, board duties evolved during the crisis. In 2020 many boards played an increased role in overseeing strategic repositionings; maintaining the corporate culture while working remotely; spearheading diversity, equity and inclusion initiatives; and guiding cash management. Ultimately, this amplified portfolio provided significant value to shareholders and stakeholders of many businesses.
This expanded role may be here to stay; once a board takes on such duties, which many companies found valuable, it’s difficult to migrate back toward a pre-COVID role. When we conduct this survey again next year, I anticipate the responses related to hours devoted to board work will see a marked, and ongoing, increase and board responsibilities continue to expand. And as the line between managerial prerogative and board oversight gets blurry, directors will need to remain careful to keep their fingers out, not to stick their noses too far in (lest managements’ noses get out of joint) and, most importantly, have their eyes forward.