Life in the Boardroom – are Non-executive directors’ additional fees safe from inflation?
July 19, 2022
Is there anything you miss about the nineties? Fortunately, you did not access this article via dial-up (hopefully). Unfortunately, inflation has reached as high as 9.1%, last seen in 1990 when Germany was still split in two.
Non-executive directors (NEDs) are typically paid an annual basic fee, but there is usually opportunity to supplement this by chairing/sitting on committees or working as a Senior Independent Director. Tabled below, our most recent survey shows that NEDs earn approx. £8,000 on average for additional roles. In a past article our results suggested that NEDs’* total fees were failing to grow beyond inflation. That looked at total fees, so will NEDs’ wallets be saved by their additional fees? This article will review the last 10+ years of our Life in the Boardroom survey data to see if additional fees are inflation proof.
Life in the Boardroom 2021/22 – NED additional fees
|Basic fee||Audit committee||Remuneration committee||Nomination committee||Senior independent director/deputy chair||Other committee fees|
Life in the Boardroom data on additional fees produces the result graphed below. When modelling the data, we found that the median additional fees did not show any statistically significant trend, as demonstrated by the essentially flat trendlines in red. The same result is found when modelling average additional fees.
The above results suggest that additional fees exhibit resistance to inflation. This is, however, not the same as growing beyond inflation, only that they have kept pace, which may run counter to expectations that earnings should increase over time, mirroring the wage stagnation of the wider workforce (https://voxeu.org/article/paradox-stagnant-real-wages-yet-rising-living-standards-uk). NEDs still may have to contend with the fact that the bulk of their earnings (their basic fees) may have also stagnated or even declined. We are restricted to the sample of NEDs we surveyed, so there is a possibility that our results do not reflect the wider population by unlucky chance. Our results can only be a generalisation, so an individual NEDs’ experience may vary with their experience, relationship with the firm, its practices, performance, etc. Our dataset saw inflation only as high as 3.8%, so it is unclear if the same trend will still apply or if today’s inflation will be too much for NED fees to keep up.
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.
*”NED” refers to both NEDs and Chairs