Non-Executive Directors – The Trend of Remuneration
Nicki Demby is a well known adviser to the Boards of FTSE100 and 250 companies with over 25 years’ experience in advising companies in the UK and internationally on remuneration strategy, pay benchmarking, short and long term incentive design, the effective communication of reward and consultation with institutional investors. Speaking at a FTSE 100 NEDonBoard panel event, we asked Nicki a couple of questions about Non-Executive Directors remuneration and Pay.
What are some key points around remuneration for non-executive directors?
A: I think the main challenge that people have today is, NED’s are not nearly as well-paid in their occupation as people might have hoped, and that’s a really big issue for boards today because it could actually reduce the diversity of people who are able to go onto boards. Nobody wants to put through big fee increases for non-executive directors today, but that is going to create an issue for us down the line [with] the pool of people that boards have to call upon to be non-executive directors. So that’s a big issue.
The other thing that I would say is remuneration is such a sensitive issue, and non-executive directors are directors of companies as much as executive directors are. You have joint liability on that board, and so it’s quite poorly paid. I used to have a rule of thumb – it was about £1000 a day (determined roughly) – the fees you should be paid, but I’m afraid rates are coming down. I was talking to someone earlier today who is a remuneration committee chairman, for example, and she was saying, you know, it’s getting down to minimum wage levels because she has to put so very many hours into the role.
It’s particularly an issue in UK quoted companies at the moment. It’s not the same elsewhere in the world, and it’s not necessarily the same in other sectors or on a private equity board either.
What do you think will happen to non-executive pay looking forwards?
A: I think one of the things that most people don’t realise when they first go onto a quoted company board, for example, is you will be asked to go on to one of the committees. You should expect to be on at least one of the committees, and sometimes two, and it used to be that audit committee membership commanded a premium fee, shall we say. It no longer does, so the risk committee, the remuneration committee and indeed some of the specialist committees like environment or safety, the levels of pay that you get paid for each of those roles is now very, very comparable. So the skillsets don’t really attract a premium.
With this in mind, some non-execs who only one or two boards may well have a full time job as well. And those who don’t may be non execs for several different companies. Just remember, you need to ensure you are able to commit to each role appropriately. If you want to raise your NED career to the next level, please visit: www.NEDonBoard.com