What is NACD's recommendation regarding director compensation?

NACD recommends that director compensation should be aligned with shareholder interests and promote long-term value creation. This approach recognizes that the ultimate goal of a company's governance is to enhance shareholder value over time, rather than focusing solely on short-term financial gains. By ensuring that directors are compensated in a way that ties their financial rewards to the sustained success of the company, their decisions and strategies are more likely to reflect a focus on long-term growth, stability, and innovation.

The alignment with shareholder interests means that directors are motivated to make choices that benefit all investors, fostering trust and accountability. This can include components such as equity-based compensation, which encourages directors to think like shareholders and be invested in the company’s future performance.

Promoting long-term value creation helps ensure that decisions made by the board will contribute positively to the organization's trajectory, supporting strategic initiatives that enhance competitiveness and sustainability in the marketplace. This contrasts with compensation structures that may incentivize short-sighted strategies or that do not take into account the broader implications and responsibilities of corporate governance.