Life in the Boardroom – are non-executive directors working harder for less pay?

March 16, 2022


Participants in MM&K’s exclusive report Life in the Boardroom – a survey of non-executive directors – raised concerns over increased responsibilities relative to their pay. In light of increased governance & regulatory frameworks, and time commitments, NED fees should be higher.” “…responsibilities have increased … NEDs are underpaid in comparison to executive directors”. Below is an excerpt from our 2021/22 report. Download your free preview here.

So, what do the data say? Looking at previous Life in the Boardroom figures since 2011, the following picture emerges:

We asked participants how many days they have worked at each of their directorships, deriving the annual median and averages (shown above) from an average of 850 data points per year. There appears to be no statistically significant increase in the average or median number of days worked over the past decade; with the average/median being 30/24 days over the period respectively.

Nevertheless, whilst NEDs may not be spending more days working at their respective firms, this does not indicate whether or not there has been an increase in the burden of responsibility (perhaps because their portfolios have expanded, possibly beyond their skills, experience, or what ought reasonably to be expected from them). In our 2021/22 report, we found that 60% of participants said their demands increased moderately or greatly (graph below) compared to 53% in the year before; respondents pointed to increased red-tape and responsibilities without a commensurate increase in pay. New in our 2021/22 report, we asked how many hours participants work compared to their contracted hours, finding that on average NEDs work six days more than they are contracted.

What has happened to NEDs’ fees? The graph below shows the average and median total annual fees*, adjusted for inflation (CPI – ONS), based on an average of 942 board positions per year. Regression analyses provide a mixed story. For median fees, there is no statistically significant trend, so this would not support the conclusion that NED fees have been losing purchasing power over the past decade. On the other hand, average NED fees do show a statistically significant trend, suggesting that average NED fees have lost approximately £1300 of purchasing power p/a over the 10 years to 2020.

The latter result follows trends for the wider workforce, as average earnings for employees across the UK have struggled to grow faster than inflation since the millennium. A decline in average fees (but not median fees) may indicate that NEDs who earn particularly high fees (like chairs, senior independent directors, and committee members) are less likely to have their purchasing power protected from inflation, whilst those in the middle and lower fee-brackets have, relatively, kept pace with inflation.

Readers should note that this does not mean that every NED will be short by £1300 each year, or that the number of days they work will exactly reflect the results discussed earlier, for multiple reasons. Firstly, a significant majority of those sampled are from smaller AIM and SmallCap firms, so the data may not reflect the situation of NEDs in larger firms. Secondly, the results above are generalisations: what an individual NED encounters will be based on factors like their experience, background, the firm’s circumstances, if they are a chair, committee member, etc. Finally, these results are only a fraction of the whole NED population, so there is a potential risk of sample-bias, (i.e. the possibility that we might have been ‘unlucky’ to pick NEDs who just happen to produce results which do not represent the whole NED population).

Further information and data on the pay of NEDs and Chairs** in firms of all industries and sizes, how they use their time, their opinions, their pandemic experiences, and more can be found in our 70+ page report on 885 boardroom positions, click here for a free preview.

Find out more about Life in the Boardroom here. Or to discuss any of the points raised in this article, please contact us.


*Both from Life in the Boardroom and from our database of past projects collected from FTSE firms’ published annual reports

**NEDs and chairs in this article are referred collectively as NEDs, although Life in the Boardroom separates NED and Chair statistics.

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