NEDs getting more bread

Non-executive directors' pay has increased. For a job well done, presumably.

Last Updated: 31 Aug 2010

According to figures from Income Data Services, the average pay increase for non-executive directors in the FTSE-100 last year was 6.3%, taking the average wage to £57,056. And that figure includes those who suffered a pay freeze. Take them out of the equation and the rest enjoyed an average pay rise of 15%.

This news is bound to cause a bit of a furore when many of the companies in question are suffering from cascading share prices, profit warnings and bailouts from the tax-payer. It gets worse when one considers that the whole reason these people are employed is to rein in the riskier, more excessive tendencies of the boardroom with the wise hand of an experienced outsider. 

Well, something clearly went wrong somewhere. The highest-paid non-executives were at mining company Kazakhmys. Its share price may have dropped 82%, but its non-execs still pocketed an average of £120k. Vodafone's non-execs earned £110,000, during a year in which its shares lost more than 25% of their value. And in a wonderful slice of inverse correlation, BT's non-execs enjoyed the biggest pay rise. Compensation went up 50% - to £60,000 - as the share price fell by the same amount.

Of course it makes sense that non-execs should be compensated well for their work - the current crisis shows the importance of putting the kibosh on the more reckless decisions. But when the crisis also shows those decisions are still being made, the arguments for increased pay don't stack up. It's like coming home from a night out to find the apple of your eye watching the Exorcist, covered in mashed potato and bits of crushed fish-fingers, and then giving the babysitter an extra £20. As long as they say sorry, we suppose...

With the government launching a review into banking governance,  this area will be firmly in the spotlight this year. If non-execs are going to take home more cash, they'll have to be a bit quicker to kick some butt in the boardroom.

In today's bulletin:
Weekend woes as BMW cuts 850 Mini staff
Lloyds hammered again amid nationalisation fears
KFC to create 9,000 jobs
NEDs getting more bread
The Sharp End: Postman dings twice

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