Non-execs working harder, but paid more

Sep 21 2005 by Nic Paton Print This Article

Pay levels for non-executive directors are rising faster than for executives, against a backdrop of increasing workload and fear of financial scandal among big corporates, a new study has found.

But the survey by KPMG is likely to further fuel the debate about non-exec fat cattery.

Excluding chairmen, the average non-executive board member in the FTSE 100 was paid 48,000 last year, an increase of 13 per cent, said KPMG.

That was almost double the 7 per cent hike in basic pay received by executive directors, a reflection according to KPMG of the increased "responsibility and risk" that non-execs had taken on.

The KPMG survey is in line with a similar study in July by Income Data Services that reported non-executive directors pay rising by more than 20 per cent over the past 18 months as more intense investor scrutiny, corporate governance responsibilities and bigger workloads made the job a more onerous one.

IDS estimated the average pay of a FTSE 100 non-executive director was now 42,000 a year, with FTSE 100 non-executive chairmen earning almost 250,000, up 25 per cent.

Within the FTSE 250 the rewards were much lower, averaging 30,000 for non-executive directors and 117,500 for non-exec chairmen.

The KPMG survey also made the salient point that non-exec rises, while large, still did not match the average take- home pay increases for chief executives of FTSE 100 companies, which reached 1.8m in 2004, up 18 per cent.

Their take-home pay is of course boosted by bonus plans and other long-term incentive packages, to which non-executives are not entitled.

KPMG partner Carl Sjostrom said the rising pay levels for non-executives was simply a recognition of a more onerous audit and governance environment, particularly surrounding the work of remuneration committees.

"The task of the committee members has become very different. There's a much greater risk to the individual," he said.

This stemmed from in part from the challenges posed by the new US Sarbannes-Oxley corporate governance legislation and recent scandals over executive pay, KPMG said.

Chief executives in the media and entertainment sectors had the highest basic salaries, averaging 805,000 in the FTSE 350, it also found.