Using the 250th ranked company, Applied Materials, as our example, the median cost of a board is around $2.83 million a year. Applied Materials has a 10-member board of which nine are independent directors. The board met five times in 2017, and every director attended at least 75% of board and committee meetings. The company elects all board members annually.
Applied Materials paid each board member an annual retainer of $70,000 and a fee of $2,000 for each meeting attended. As of the second quarter of last year, audit committee members began receiving an additional annual retainer of $25,000, human resources and compensation committee members receive an extra $12,500, and governance and nominating committee members receive an additional $10,000. The board chairperson receives an additional $150,000 annually, and committee chairs receive between $12,500 to $25,000 in additional retainer fees. Other fees and travel reimbursements are also paid.
In addition to these cash payments, all nine non-employee directors received a stock award valued at $222,643 in 2017.
If Applied Materials is typical, how much are board members paid in the extreme cases? The S&P 500 company that paid its directors the least was Berkshire Hathaway. The company pays a fee of $900 for each meeting attended in person and $300 for participating in any meeting conducted by telephone. A director who serves as a member of the audit committee receives a fee of $1,000 quarterly. Directors are reimbursed for their out-of-pocket expenses incurred in attending meetings of directors or shareholders. Microsoft co-founder Bill Gates was paid $2,700 in 2017 for his service as a Berkshire Hathaway director. The company did not report any stock awards to directors in 2017.
At the top end of the rankings of board costs are media giant 21st Century Fox and pharmaceutical maker Regeneron. Both companies reported 2017 board costs of more than $20 million and were the only two companies to report board costs of more than $7.9 million. Federal regulations require public companies to report payments made to directors for professional services to the company.