Private companies are increasingly recognizing that a strong board of directors isn’t just a formality—it’s a strategic asset. A well-structured board brings governance, risk oversight, and business expertise that can drive long-term success. But how should private companies compensate their board members? Unlike public companies, which disclose executive and board pay in SEC filings, private firms have more flexibility but less standardized guidance.
This article breaks down how private companies typically structure board pay, how to benchmark compensation effectively, and key differences between private and public board pay structures.
How Private Companies Structure Board Pay
There’s no one-size-fits-all approach, but most private companies compensate their board members using a mix of:
- Annual Retainers – A fixed payment for board service, often higher for the board chair or committee chairs.
- Per-Meeting Fees – Some companies pay board members per meeting attended, though many are shifting toward all-inclusive retainers.
- Equity Grants – While common in public companies, equity compensation in private firms varies. Some offer phantom stock, restricted stock, or stock appreciation rights (SARs) to align board incentives with company growth.
- Committee Fees – Additional pay for directors serving on audit, compensation, or governance committees.
- Expense Reimbursements & Perks – Travel reimbursements, director liability insurance, and access to company resources.
While these components are standard, private companies have greater flexibility in structuring compensation based on their governance needs and financial strategy.
Benchmarking Board Pay: Best Practices for Private Companies
Because private companies aren’t required to disclose board pay, finding the right benchmarks takes a more strategic approach. Here’s what works best:
- Industry & Peer Comparisons – Reviewing compensation in comparable private companies through industry reports and board governance resources like the National Association of Corporate Directors (NACD).
- Company Size & Complexity – Compensation should scale with revenue, company size, and the level of oversight expected from board members.
- Public Company Comparisons – While private company board pay is generally lower, public board compensation data can still serve as a useful reference point.
- Compensation Alignment – Pay should reflect the time commitment, expertise, and strategic value directors bring to the company.
Companies that don’t benchmark effectively risk either underpaying (making it hard to attract top talent) or overpaying (draining resources unnecessarily).
Private vs. Public Company Board Pay: Key Differences
Board compensation for private companies tends to be lower than public company board pay, for a few key reasons:
- Equity vs. Cash: Public company directors receive much of their pay in stock or stock options, aligning their interests with shareholders. Private company boards, unless preparing for an exit or liquidity event, rely more on cash retainers.
- Regulatory Differences: Public company boards have greater fiduciary responsibilities, SEC-mandated disclosures, and legal obligations, which justify higher pay.
- Market Dynamics: Many private company boards—especially in founder-led or family-owned businesses—serve in more of an advisory capacity than as full governance bodies. However, private equity-backed firms and larger private companies often offer compensation that mirrors public company board pay.
For a deeper dive into public vs. private board compensation structures, check out this Harvard Business Review article.
Final Thoughts: Finding the Right Balance
A well-structured board compensation plan is critical for attracting experienced directors while keeping pay aligned with the company’s financial strategy. The best approach? Private companies should benchmark carefully, structure pay based on company needs, and review compensation regularly to stay competitive.
At Kavea, we specialize in compensation strategies that align pay with purpose. Whether structuring board pay, employee structure, executive incentives, or broader compensation frameworks, we help private companies build sustainable and competitive pay practices.
Want to ensure your board compensation is on the right track? Get in touch with us.
