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Pay Pressure Hits UK Non-Executive Directors

Posted on January 12, 2014 at 2:15 AM

All those on the 'I want to be a non-executive director (NED) on a FTSE100 board to get rich' bandwagon might need to think again. They are well paid but their role has changed dramatically since the financial crisis, the risk has increased, and now it seems a period of pay rises has come to an end.

Research from PwC shows that base board fees for NED roles in the FTSE100 are beginning to plateau after several years of rises as companies try to keep pay increases for executives and NEDs more in line with the rest of their employees.

FTSE100 chairmen haven't suffered much, it has to be said. The median base fee is £361,000 in 2013, broadly flat - in 2012 it was £360,000. But for FTSE100 NEDs the median base drops from £64,000 in 2012 to £61,000 in 2013. This follows five years of increases from 2009, when FTSE100 chairmen earned a median base of £300,000 and NEDs one of £55,000.

So has the penny dropped about paying attention to pay for a whole host of reasons- including investor concerns reflecting public disgruntlement - at FTSE100 plcs? Hard to say, I think, from this evidence.

Fiona Camenzuli, a PwC Partner in its reward team says: "As with executive pay, companies are keen to show restraint in non-executive directors pay by ensuring any pay rises are not out of kilter with their wider employees. With average employees' pay increases limited to inflation in many cases, it will be harder for companies to justify a higher increase (for NEDs)."

"The new (UK) reporting regime will put further pressure on fee levels for non-executive directors as companies will now have to establish and disclose their policy on fees, which will be subject to a binding vote. Any increases that are inconsistent with the approved policy will be unlawful" adds Ms Camenzuli.

In this climate, the role of chair of the remuneration committee, or RemCom, is better paid for the brave in the FTSE100. Its median fee (on top of a NED fee) has risen to £20,000 from £12,000 in 2009, making it equivalent to chairing the audit committee.

You could say that maybe, just maybe: FTSE100 boardrooms are beginning to value a wider range of human skills in the boardroom.

It certainly used to be that chairing audit required a very specific skills set. It is only recently that even some firms that actually do audit have nonethless looked at the need for a wider range of skills on board audit committees.

Chairing a RemCom goes to the heart of being a NED, in my view. Its about intelligent analysis, asking the tough questions, starting the unpopular conversation - and probably taking the hard call in judgement. And then facing the media with the decision. 

Note: as this will go live as soon as not under embargo please check the Pwc website for the report. Thank you.

Categories: Measurement, Governance, Appointments