Total pay for outside directors at U.S. companies showed only a moderate increase in 2012, according to a recent analysis from global professional services firm Towers Watson.

A review of pay data from 469 Fortune 500 companies' proxy filings found that median total pay for outside, or non-executive, directors increased three percent from $220,000 in 2011 to $227,000 in 2012. This figure is slightly below the five percent increase in director total compensation in 2011. Total compensation includes cash pay, and annual or recurring stock awards.

The analysis also revealed that the median value of cash compensation increased eight percent over last year to $100,000. According to the analysis, this jump is “driven primarily by the first increase in the median cash retainer in two years.”

Compensation from annual and recurring stock awards remained virtually unchanged last year at $125,000, after increasing nearly 10 percent at the median in each of the last two years, the analysis found.  “This represents the slowest yearly growth since the height of the economic crisis in fiscal 2009, when the median annual equity award increased by just one percent,” according to the analysis.

“Cash retainers are playing a larger role in the compensation mix for outside directors as the majority of companies have now eliminated meeting fees, reflecting the evolution of director roles to 24/7 commitments,” said Doug Friske, global head of executive compensation consulting at Towers Watson. “While director pay increases in the early years of this decade were primarily driven by rising equity values, last year's increase was fueled by growth in cash compensation.”

While the median annual equity award value did not increase in 2012, equity remains a significant portion of the pay program for directors of most companies, the analysis found. The average pay mix for Fortune 500 directors remains 45 percent cash and 55 percent equity.

The analysis also found that most companies have adopted stock ownership guidelines and stock retention policies for director pay programs. In 2012, 89 percent of companies had either or both types of mandates, up from 87 percent in 2011. The median value of stock ownership required for directors subject to stock ownership guidelines increased from $300,000 in 2011 to $350,000 in 2012.

In addition, annual cash board retainer increased by seven percent at the median in 2012, rising to an all-time high of $80,000. Continuing the trend of the past several years, companies replaced various types of variable cash pay for directors, such as per-meeting fees for board and committee service, with new or increased retainers.

The prevalence of per-meeting fees for board meetings dropped from 32 percent to 28 percent over the past year, while the practice of providing meeting fees for committee meetings declined from 37 percent to just over a third. By comparison, the prevalence of flat cash retainers for committee service increased slightly, while the median committee member cash retainer rose from $7,500 to $8,000.

“The demand for experienced, talented directors to serve on boards remains strong and will likely grow as companies address the retirement of long-standing members and pursue greater member diversity,” said Friske. “As a result, we expect companies will continue to evaluate their overall director compensation programs and policies to ensure they are able to attract the best directors to their boards.”

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