introduction
Private company boards continue to face a rapidly evolving governance environment characterized by expanded director responsibilities, increasingly complex risk oversight, and heightened expectations for alignment between compensation and organizational performance results.
While public company director compensation data remains the most widely available and frequently used reference point, private company director pay practices have meaningfully evolved due to increased director workloads, new governance expectations, and increased adoption of equity-like compensation mechanisms. Additionally, private companies are increasingly seeking the same board talent as public companies. Therefore, a competitive value proposition is important for private company directors.
This 2026 update provides a current perspective on how private companies can benchmark and design competitive executive compensation programs that align with governance realities and talent market demands.
Evolving director talent market
Private companies are competing with public companies for directors with expertise in strategy, digital transformation, cybersecurity, and human capital.
The key dynamics that will shape the market in 2026 are:
- Director hours have been expanded, often approaching public company levels.
- Demand for expertise in AI governance, workforce transformation, and environmental, social, and governance risk management is growing.
- Expectations for board involvement in company strategy, talent development, and culture will increase.
This pressure has led many private companies to reevaluate their director compensation levels, which have traditionally lagged behind public company standards.
Benchmarking in 2026
Because reliable private company director compensation data is limited and often sector- and industry-specific, independent of size, which is the primary determinant of director pay levels, private companies continue to leverage public company benchmarks with subtle adjustments.
Current benchmarking methodologies reflect the following market trends:
- Market data is obtained from surveys or peer groups of publicly traded companies appropriate to size and industry (in this case, typically the same peer group used to benchmark executive compensation).
- Boards are increasingly evaluating the position of total compensation, as well as cash compensation, given the growing use of synthetic stock and additional cash payments to compensate for shortfalls in substantive equity grants.
- Pay structures are increasingly adapted to the skill requirements of directors and the complexity of the company.
Public company director pay structures continue to serve as a model for private board program design, including annual board cash retention, additional cash retention for board leadership and committee service, and consideration of long-term incentives and comprehensive value-sharing mechanisms.
Like public companies, private companies are moving away from paying meeting fees to simplify management and reinforce that directors are compensated for their oversight and fiduciary responsibilities rather than for the meetings they attend.
The rise of synthetic stocks and value-based programs
One of the most important recent developments in private company executive compensation has been the widespread adoption of long-term, value-based compensation mechanisms.
These programs aim to replicate the following linkages created by public company equity grants:
- A phantom stock that leads to growth in corporate value.
- Cash-based long-term value creation plan.
- Deferred cash tied to long-term corporate performance measures.
- Additional cash retention structured to reflect the value of a public company's stock.
These tools are particularly prevalent in private equity-backed companies and large family-owned businesses looking to attract board members with the same level of experience as publicly traded companies.
However, private companies considering long-term compensation factors need to strike an appropriate balance between director compensation that is competitive and rewards directors for their fiduciary duties, and director compensation that is linked to company performance. The long-term compensation component of a director compensation program should not reflect management's incentive design. In doing so, the distinction between independent oversight and day-to-day operational management may become blurred.
Director compensation level and position in 2026
Privately held companies are updating the way they think about remuneration as directors' responsibilities expand. Common positioning trends compared to appropriate public company benchmarks include:
- Cash Compensation: 50th to 60th percentile of comparable public company benchmarks.
- Total compensation (excluding synthetic capital): Often in the 40th to 50th percentile range.
- Total compensation (with synthetic stock or long-term cash plan): 40th to 60th percentile.
These changes reflect increased board workloads, increased governance complexity and liability risks, and directors' expectations for market-competitive compensation.
Special considerations for nonprofit boards
Large nonprofit organizations, particularly in the health insurance, higher education, and national philanthropic sectors, continue to evolve their executive compensation frameworks.
Key trends for 2026 include the increased use of retainers rather than meeting fees, and greater differentiation between committee chairs and board officers. We also expect continued conservative market positioning (25th to 50th percentile), but an upward trend for larger or more complex organizations.
Nonprofits face the same governance challenges as private and public companies (particularly risk, compliance, and workforce issues), and there is an increased focus on wage competitiveness.
Expectations for new governance determine director compensation
Board responsibilities have expanded significantly, particularly in areas where private companies have historically faced light oversight requirements.
The key governance areas in 2026 that will impact director compensation for both public and private companies are:
- AI Governance: Oversee AI strategy, ethical safeguards, risk management, and employee impact.
- Cybersecurity: Increased breach response, incident response monitoring, and engagement with corporate cyber risk frameworks.
- Human capital and culture: Expectations around workforce strategy, leadership succession, inclusion and belonging, engagement, and talent risk have expanded.
- Regulation and stakeholder expectations: Even private companies are under increasing pressure from private investors, lenders, and rating agencies for more transparent governance practices.
Director pay programs are increasingly tailored to reflect this broader responsibility and expertise.
conclusion
Director compensation at private companies continues to evolve as governance expectations increase, the talent market becomes more competitive, and the need for directors with specialized knowledge increases.
Companies designing director pay programs for 2026 should:
- Ensure compensation is tailored to the complexity and demands of the board's services.
- Incorporate synthetic equity or long-term value-sharing mechanisms as appropriate.
- We carefully use public company data to benchmark and customize based on company size, ownership model, and industry.
- We recognize the growing importance of AI, cybersecurity, and human capital oversight in determining competitive pay.
A well-designed director compensation program remains an important tool for attracting, retaining, and motivating high-quality board members, regardless of public or private status, who can guide organizations through times of rapid change.
