How Much Should A Director Pay Themselves?

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For many people, the term “board of directors” sounds so ominous. Some might picture a group of faceless people ready to rule the world. Others might see a team of individuals who always wore white and talked in riddles and complicated jargon. 


It can also conjure a portrait of a group of super-rich executives who have plans in creating a new world order. These images are a little far off from the truth though. In reality, it can be quite dull. Nevertheless, they are essential in building a company that can sustain the livelihood of all the people involved in it. 


As you may know, these directors are the reason why any company exists. They are the ones who invest their assets to form all of it. This way, they can establish an institution which can return their investments as profits. It is their responsibility to hire the management, who in turn would employ the rest of the workforce. From the low rank-and-files to the managers, it is now their responsibility to keep everything running as smoothly as possible. 


What Is It Like To Assume A Directorial Role?


Directors may or may not necessarily be a part of the company’s day-to-day operation. But without doubt, they have a say as to which direction the business is going. After all, they are usually the stockholders. They can decide who is going to lead them to success. 


If one candidate does not work, then the board can easily remove him or her, it might take a bit of time and a lot of legal procedures, but it will always be the board’s decision. There will be many factors taken into consideration, like performance and stability. Even if you have the label “chief” on your job title, you do not have the singular power or influence.


If you ever find yourself in this position, then you are in luck. You are now a part of one of the most exclusive groups of people in the world. All of you might come from the business side of the world, but with different backgrounds. However, you might be wondering about the means of compensation. More specifically, how much are you going to receive? You are technically a stockholder after all. 


As a director, you are not going to receive the same compensation as the usual employee. Instead, you may also be entitled to a percentage of the company profits. If you are a significant stockholder, then you would have a higher compensation as well. 


Company Directors As Stockholders


You can also charge for a director’s fee, but this will depend on the circumstances. There are even cases wherein you might not be entitled to these payments. For example, you already hold another position in the company. By then, you would receive compensation for the role. 


The amount is usually still based on the percentage of their ownership in the company. Meanwhile, it should never exceed the amount that they own in the company. If this happens, it could be considered fraudulent, and there can be a case against this.


Meanwhile, the shareholders still have the power regarding additional compensation. As previously mentioned before, there are a lot of ways that this can be done. It is still under the jurisdiction of the shareholders, whether this will be approved or not. Remember, a director is not a part of the company’s payroll. It will all be a part of their total payment for their services.


As a part of the board, you still have the right to better compensation. After all, it is your responsibility to make sure that the company is run smoothly. Anytime there is a crisis or issue, you have to contribute to finding a solution. It can be a challenging set of responsibilities so it has to be a risk that will pay off over time. 


As to how much to expect exactly, we may be able to give you some input. Message us on any of our social media/communication channels today and we’ll be sure to get in touch!   

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Annette Ferguson

Annette Ferguson

Owner of Annette & Co. - Chartered Accountants & Certifed Profit First Professionals. Helping Online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.