# How to set board compensation > A practical checklist for chairs, compensation committees, and nonprofit boards deciding whether and how to pay directors. Not legal, tax, or… Source: https://preparedboard.com/guides/how-to-set-board-compensation · Updated 2026-10-05 **Target keyword:** how to set board compensation **Intent:** Informational / Checklist **Last updated:** 2026-10-05 --- ## What this guide is (and is not) A practical checklist for chairs, compensation committees, and nonprofit boards deciding whether and how to pay directors. **Not legal, tax, or compensation-consulting advice.** Have counsel and, for public companies, your compensation advisor review anything you adopt. Figures cited below come from public sources listed on [/board-compensation](https://preparedboard.com/board-compensation) with year and URL. ## Start with the board type 1. **Public / reporting companies.** Non-employee director pay is disclosed in the annual proxy (SEC Item 402 tables). Spencer Stuart's 2025 U.S. Board Index reports S&P 500 average total non-employee director compensation of **$336,352** (≈59% stock awards, ≈36% cash) and a **$110,000** median annual cash retainer. Independent chairs and lead directors usually receive additional retainers. Meeting fees are now rare at S&P 500 boards. 2. **Private companies.** Pay is more varied. The 2025 CAP / Private Company Director survey (633 respondents) reports a **$38,800** median annual cash retainer, **$2,500** median per-meeting fee where used, and **37%** offering long-term incentives (median award value **$50,000**). Ninety percent of respondents provide some director compensation. 3. **Venture-backed / early startups.** Practices are often equity-heavy and cash-light for independent directors; investor directors and founders frequently take little or no incremental board cash. Treat any percentage ranges you hear as anecdotes unless you have a primary survey you can cite. 4. **Nonprofits.** **Most U.S. nonprofit directors serve as volunteers** ([BoardSource](https://boardsource.org/resources/board-member-compensation/)). Compensation is legally permissible in some contexts but uncommon, can affect independence determinations, and — when paid — must be reasonable and disclosed on **IRS Form 990 Part VII**. Prepared does not invent an unpaid percentage; BoardSource's public guidance says "most," not a free public statistic we can quote as a number. ## A careful process (any board type) 1. **Write the purpose.** What problem does pay solve — time, expertise, equity of who can serve, market competition for directors? If the answer is unclear, fix workload and role design first. 2. **Check governing documents and law.** Bylaws, charter, state nonprofit or corporate law, and any investor rights agreement. Some entities restrict or forbid director pay. 3. **Gather comparables.** Public proxies, Form 990 filings for peer nonprofits, NACD/Pearl Meyer or CAP surveys you actually have access to, and — when enough peers opt in — Prepared's anonymized aggregates at [/board-compensation](https://preparedboard.com/board-compensation) (nothing numeric until ≥10 non-demo boards per cohort). 4. **Separate the decision from the beneficiaries.** Directors who would receive the pay should recuse from the vote that sets their own compensation. Record the recusal. 5. **Document the record.** What materials you read, which peers you considered, who advised, what you decided, and why. That is the same discipline Prepared keeps for other board decisions — prepare, decide, prove. 6. **Prefer simple structures.** Annual retainers over proliferating meeting fees; clear chair/committee premiums; equity with clear vesting for private/public companies; expense reimbursement policies even when base service is unpaid. 7. **Revisit on a calendar.** Put director pay on the annual governance calendar. Markets move; so does workload. ## Nonprofit-specific notes - Volunteer service supports independence and public trust for many charities. - If you introduce stipends (for example, to widen who can serve), document the equity rationale, get counsel, and plan Form 990 disclosure. - Reimbursement for travel, childcare, or lost wages is different from a retainer — still document it. - Paying directors can change who counts as an independent voting member for Form 990 Part VI — ask your CPA. ## Public-company-specific notes - Align with your peer group and compensation consultant's report. - Watch stock ownership guidelines, committee premiums, and chair/lead differentials. - Remember: the proxy is public. Assume employees, investors, and journalists will read it. ## How Prepared Board helps - Keep the **decision record** (materials, recusals, vote, evidence) on the compensation decision itself. - Use the **governance calendar** so the annual review is not forgotten. - Opt into **peer compensation aggregates** only when you want to contribute anonymized figures — demo boards never count; cohorts stay blank until N≥10. - Export the full record if you leave ([/leaving-prepared](https://preparedboard.com/leaving-prepared)). Prepared does **not** compute a "fair pay" score, does not file Form 990 or proxies, and does not replace a compensation consultant. ## Sources See the linked, dated citations on [/board-compensation](https://preparedboard.com/board-compensation#public-sources). Primary among them: Spencer Stuart U.S. Board Index 2025; CAP / Private Company Director 2025 survey; BoardSource board member compensation guidance; IRS Form 990 Part VII instructions; SEC executive compensation / proxy resources; NACD / Pearl Meyer 2025–2026 Director Compensation Report (scope cited; member-only detail not quoted unpaid). --- _Practice guidance, not legal advice. Bylaws, statutes, and counsel control._ Cite this page: Prepared Board, "How to set board compensation," https://preparedboard.com/guides/how-to-set-board-compensation (updated 2026-10-05). Anchor: https://preparedboard.com/guides/how-to-set-board-compensation#cite-this Product claims are verified at https://preparedboard.com/facts and https://preparedboard.com/agent-facts.json. Anything not listed there is not a Prepared Board claim.