In private companies, board compensation is a valuable tool for accessing expert insights and guidance. As the board takes on increasingly sophisticated roles in governance, transformation, and value creation, aligning your compensation offerings with performance expectations is essential.
Determining what the “industry average” is can be challenging because private boards don’t face the disclosure requirements that public companies do. To offer some helpful insight, this overview will examine current benchmarks, compensation models, and how to prioritize performance to create a board that delivers real value.
Board Pay Begins With Revenue Realities
Private board compensation is highly dependent on company size.
The easiest way to begin unpacking board pay trends is to segment companies by revenue.
Companies with less than $20 million in revenue rarely have full-time boards.
At this stage, advisory roles are often filled by informal advisors or close contacts, sometimes referred to as “golf buddy boards.”
Traditionally, advisors receive little to no compensation. Instead, there’s an unspoken agreement that each will reciprocate and provide advisory services to one another.
These early-stage companies aren’t structured for robust board governance, and the compensation (or lack thereof) reflects that.
Here’s a closer look at the higher revenue ranges and how they impact the presence and compensation of executive boards.
$20–$50 Million
Once companies grow into the $20–$50 million range, the use of boards typically begins.
At this stage, many boards are still advisory and non-fiduciary. However, they start to resemble functional governing bodies with regular meetings and strategic input. Compensation is usually structured as a daily rate, but different payment structures are available.
The lines can be blurry at this stage, as fast-growing businesses may realize a need for a true advisory board. On the contrary, companies with a strong C-suite leadership structure and relatively predictable growth may stick with the less formal approach.
$50–$200 Million
Boards in this revenue range transition into formalized, recurring advisory or fiduciary structures.
Compensation often falls between $20,000 and $30,000 per year, which is typically delivered via annual retainers and meeting fees.
Members of these boards must increase their availability. Organizations in this stage demand experience, industry insight, and strategic acumen. Compensation reflects the higher expectations and time commitment.
If your organization falls into this revenue range, it may be time to implement a fiduciary or advisory board. When embarking on this endeavor, take time to consider factors like the size of the board, the specific roles you need, and the compensation you’re prepared to offer.
More Than $200 Million
At the $200 million mark and above, board compensation scales accordingly.
Annual compensation ranges between $25,000 and $75,000, depending on structure, complexity, and board member expertise. These boards are often fiduciary in nature, and directors are expected to deliver a measurable impact.
As ownership becomes increasingly separate from management, independent board oversight becomes crucial. The fee structure implemented is based on the increased demand for expertise and insights.
Why PE & VC Boards Are Outliers
Private equity (PE) portfolios and venture capital (VC) firms follow different compensation conventions.
PE boards often pay directors significantly more, which can largely be attributed to the increased governance intensity and growing financial mandates. Directors must be well-versed in a variety of state, federal, and international laws to effectively govern the firm and avoid compliance challenges.
VC boards, on the other hand, rarely compensate independent directors with cash. That’s because most board members are investors, founders, or executives. As such, compensation may come in the form of equity or deferred value, though there are exceptions.
Median Compensation Is Rising
According to recent research, the median compensation for board members is rising. The overall median has climbed to a $30,000 retainer per year on average. Companies below the $50 million threshold are also paying cash compensation to board members to the tune of $20,000 annually.
The increase in compensation demonstrates the demand for expertise and fiduciary guidance. Businesses need strategic and governance inputs from talented board members, which means they must offer competitive compensation.
How the Compensation Structure Is Changing
Historically, private boards relied on a mixture of annual retainers and per-meeting fees. However, many businesses are moving toward a pure retainer model.
Meeting fees are becoming less relevant and less widely used. Compensation is now tied more to ongoing engagement than attendance. This shift recognizes that a director’s contribution extends beyond the boardroom.
The best directors lead businesses through risk reviews and help them navigate crises. Experienced leaders know their worth and expect compensation that reflects the value they deliver.
Using Role-Based Compensation to Differentiate Value
Not all board seats carry the same weight. As such, many private companies are differentiating compensation by role. Your organization can do the same to derive better value from its executive board.
For instance, lead directors and committee chairs might receive additional retainers based on their experience and level of involvement. Similarly, since chairs of audit, compensation, and governance committees face greater scrutiny and workload, they should be compensated accordingly.
If you’re looking to build a team of deeply engaged and experienced board members, you should be prepared to pay a premium.
Aligning Compensation With Performance Accountability
Perhaps the most critical dimension of board pay is performance alignment. Compensation shouldn’t reflect time served but value offered.
Remember, your board is meant to be a strategic asset. Director compensation should therefore be seen as an investment, not a cost.
This means tying pay to the board’s ability to follow through on governance priorities and accelerate the growth of the business. You want to incentivize board members to show up every day, be engaged, and use their knowledge and insight to achieve organizational goals.
Pay for Purpose, Not Just Presence
If your organization already uses a board, reevaluate your compensation model. If it’s in the process of bringing in directors and executive board leadership, choose a model that aligns with your revenue and expectations. Compensating members fairly and strategically ensures that you can access the caliber of leadership needed to scale.
