Analysis of the movements in non-executive directors’ fees shows that two-thirds of FTSE 350 companies chose not to increase fee levels in the last financial year in spite of the continued increase in the level of responsibility and scrutiny of such roles in many cases.
KPMG, the global network of professional service firms providing Audit, Tax and Advisory services, today has produced a guide analyzing the latest trends in FTSE 350 non-executive directors’ fees. The guide includes information on fee levels for the positions of non-executive chairman, deputy chairman, senior independent director and other non-executives.
Traditionally, non-executive director fees were not reviewed annually; it was more common to review fee levels every two or three years. As we noted last year, anecdotal evidence suggests that some companies have begun to conduct annual reviews, in line with the practice for executive directors. However, this still appears to be a minority practice.
Despite the growing responsibilities of non-executive directors and the increasing scrutiny of the role, difficult economic conditions appear to have influenced company practice on fee levels. Many companies which froze basic pay for executive directors also froze levels for non-executives. More than 65 % of FTSE 350 companies that have been in the same index for both 2009 and 2010 have not increased fee levels over the period.
Consequently there is typically a significant fee differential between the chairman and other non-executive directors.
The survey shows total non-executive chairman fees broken down by market capitalization, turnover and industry, inclusive of any committee fees and irrespective of time commitment. As would be expected, those chairing the largest companies are paid significantly more than those in companies in lower bands.
Most companies now identify a senior independent director (SID) which role generally attracts an additional fee. In some organizations the deputy chairman fulfils the role of the SID and over recent years the differences between the two roles have become blurred.
Over recent years we have seen a continuing increase in the number of companies paying additional fees for membership and chairmanship of the main board committees.
Principally this is seen with the audit and remuneration committees. In the FTSE 350, 77 % of companies disclose an additional audit committee chair fee and 71 % a remuneration committee chair fee. Company size again has an influence over the level of additional fees.
The guide analysis the latest trends in FTSE 350 non-executive directors’ fees. FTSE constituents and market capitalization figures are as 31 May 2010 and turnover figures used for the analysis are as the relevant reporting date for each company.