Life in the Boardroom – does length of service and age impact NED fees?
May 25, 2022
In MM&K’s exclusive report Life in the Boardroom 2021/22, we surveyed 885 boardroom positions on their demographics, fees, and much more. This article analyses the results of Life in the Boardroom to see if the age or length of service of NEDs* has any impact on the fees they receive.
As shown in the chart below, we found that our respondents’ age was heavily biased towards older age groups. Approximately half of respondents were aged 55-64, and only 1% were below 40.
When modelling the relationship between the ages of our participants and their total fees, there is no statistically significant evidence which would indicate that NEDs see an increase in their fees as they age. Before seeing any data, one might guess there would be a positive relationship between an individual’s age and their earnings, perhaps because people develop their skills, become more adept at negotiation, and so on.
However, our result would appear to agree with trends in the wider UK workforce: ONS data suggest that earnings for the UK workforce at large increase with age, but this trend appears to flatten at ages above 50. Because 94% of our respondents were aged 50 and above, our data may indicate that NEDs follow the rest of the population by not continuing to increase their earnings as they age.
We found that participants reported working a median of three years in their roles, as shown by the table below.
|Length of service||Years|
When modelling the relationship between the length of service participants reported in their roles and their fees, a statistically significant trend was found, suggesting that NEDs earn approximately £2,900 more on average for every year they work in their role. However, this should not necessarily be interpreted that each NED will see a £2,900 increase in fees each year. Correlation is not causation, so it may be that other variables cause this increase; it may be that NEDs are more likely to stay longer in a role they are familiar with and skilled in, leaving roles they are not suited for, so, potentially, they are rewarded for their skill, and service length is a side-effect. This effect might also be a result of NEDs taking on additional roles on board committees (e.g., audit committee, remuneration committee, nomination committee), which are very typically rewarded with higher fees. Thus, NEDs may see increased fees not simply because of their seniority but because a NED who has been at a firm longer will probably be offered more opportunities to take on such committee roles.
Further information and data on the pay of NEDs and chairs in firms of all industries and sizes, on 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.
*Please note that in this article, ‘NEDs’ refers to both non-executive directors and chairs