Directors get more for less

Good news for non-execs – a new survey suggests they're working less and getting paid more...

Last Updated: 31 Aug 2010

Daily pay rates for non-executive directors and independent chairmen are increasing by 7% and 5% respectively each year, according to a survey carried out by search firm Hanson Green and pay consultant MM&K – more than twice the level of inflation.

That’s despite the fact that the amount of time they’re spending in these companies each month has actually been falling in the last few years. After jumping nearly 30% in the aftermath of the Higgs Review in 2003 (which aimed to make boards more professional), the average time commitment for a non-exec has since fallen by about 10% - the average NED now spends about two days per month at about three different companies. But that hasn’t stopped the wage spiral.

Apparently a FTSE 100 chairman picks up about £3,000 a day, or £2,500 if it’s a mid-cap and a piffling £1,500 for small caps. A non-exec can expect to receive about £1,300 a day for small companies and £1,600 for anything bigger. By our maths, that means a sought-after chairman can make over £200,000 for six days' graft a month. Nice work if you can get it....

And if you think that sounds like a waste of money, you could find support from an unlikely source. Nearly 20% of the 250 directors surveyed thought that their board was not ‘fully effective’ – a figure which rises to 34% for AIM-listed companies, and 42% for unquoted companies. In other words, the smaller the company, the more likely it is to have a useless board. This is often because these companies will have one very powerful shareholder (the founder, for example), who the board feels unable to control.

Still, as Hanson Green and MM&K point out, day rates like these are less than you’d pay to get a good lawyer, banker or accountant for a day. So some of these appointments – i.e. the ones who actually contribute something useful – will represent pretty good value.

Now if only we could get our publisher to sign up to this ‘work less, get paid more’ principle...

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