Figures published today suggest NEDs in FTSE 100 companies have seen their pay rise from about £55,000 in 2009 to £64,000 in 2012. But in 2013 this amount fell to £61,000.
Similarly, the median base fee level for FTSE 100 chairmen rose from £300,000 in 2009 to £360,000 in 2012. But it only grew to £361,000 in 2013.
Bucking the trend, fees for members of the remuneration committee have continued to increase, jumping from £12,000 a year in 2009 to £20,000 in 2013.
Fiona Camenzuli, a partner in PwC’s reward team, told HR magazine slower pay increases for non-executives would have happened earlier had the impact of the financial crisis, which has hit pay for other employees, not come at the same time as non-executives’ roles became more important.
“One of the big reasons there’s been a bit of a slowdown is partly the general environment around pay,” she said.
“A lot of different stakeholders and bodies have been very vocal about executive pay for the past couple of years. Companies have been trying to be a lot more moderate about pay packages.
“Because of that they’re also now minded to be a bit more conservative around what they do for non-executives, particularly when their performance has not been what they would have liked it to be."
High-risk roles
Camenzuli said the role of non-executives has changed "dramatically" since the financial crisis.
“The huge increase in risk and regulatory requirements has put non-executive directors firmly in the spotlight and led to many dedicating far more time to the role to properly fulfil their duties," she said.
“Many non-executive directors felt their pay needed to increase to reflect the time commitment and considerable reputational risk which now accompanies the role.”
Camenzuli said this was still the case for remuneration committee members, particularly since the Government introduced new remuneration reporting regulations in 2013.
“The role of a remuneration committee chair is unrecognisable from what it was 10 years ago,” she said. “It is now such an onerous position because there is so much regulation – the sensitivity of that role has really grown.
“That has been coupled with the new regime on a binding vote for executive pay. The personal reputational risk of being the remuneration chair is massive now.”
Camenzuli said she expected non-executive directors’ pay would not freeze or fall in the future, but continue to increase moderately year-on-year.
She said the changes to pay would be unlikely to cause recruitment problems for HRDs.
“The real issues for recruiting remuneration committee chairs isn’t the pressure on fees, it’s trying to find the right person with enough experience,” she said. “There is not a massive pool of people who have got masses of experience in that area.”
PwC based its analysis on data from FTSE 350 and FTSE Small Cap companies, excluding investment trusts.
