Non-executive directors in FTSE100 companies are seeing an end to the increases in their fees experienced after the financial crisis, according to a new report by PwC.
PwC’s research reveals that the base board fees for non-executive director roles in the FTSE100 are beginning to plateau after several years of rises, as companies try to keep pay increases for executives and non-executives more in line with the rest of their employees.
The median base fee level for FTSE100 chairmen is £361,000 in 2013, which is broadly flat compared to 2012 (£360,000). For FTSE100 non-executive directors the median base fee is £61,000 in 2013, a slight drop from 2012 where the median was £64,000. This follows five years of increases for both FTSE100 chairmen and non-executive directors from a base of £300,000 and £55,000, respectively, in 2009. Fees in FTSE 250 companies have continued to rise over the same period.
Fiona Camenzuli, partner in PwC’s reward team, said: “The role of non-executives has changed dramatically since the financial crisis. The huge increase in risk and regulatory requirements has put non-executive directors firmly in the spotlight and led to many dedicating far more time to the role to properly fulfil their duties. Many non-executive directors felt their pay needed to increase to reflect the time commitment and considerable reputational risk which now accompanies the role.
“Following five years of steady increases, our research suggests non-executive directors’ base fees have stabilised. 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 non-executive directors.
“The new 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.”
Despite the restraint shown for non-executive directors’ base fees, those who are members of the remuneration committee continue to see steep rises in their fees. The fees for chairmanship and membership of the remuneration committee for FTSE100 companies have jumped 65% and 140% respectively since 2009. This takes the median fee for a remuneration committee member from £5,000 in 2009 to £12,000 in 2013.
The median fee for chairing the remuneration committee now stands at around £20,000 per annum in the FTSE100, up from £12,000 in 2009. This is the same level as audit committee chairmanship fees, which remained at £20,000 per annum for a third consecutive year. Membership fees for the audit committee, which had not risen since 2010, have increased by 50%.
Fiona Camenzuli, partner in PwC’s reward team, said: “It is clear that chairing the remuneration committee is now considered as onerous as chairing the audit committee. The intense spotlight on executive pay means the remuneration committee chair has an extremely difficult balancing act between setting pay levels which satisfy shareholders, company executives, the wider workforce and often the general public. The potential repercussions of getting it wrong are huge so it is no surprise that fees are rising to reflect the increased pressure.”
