Executive remuneration how is directors' pay set?
The thorny issue of executive pay is never far from the headlines. Whether it’s Rolls-Royce chief executive Warren East taking a £916,000 bonus in a troubled year for the company or WPP boss Sir Martin Sorrell being awarded more than £40m in 2016, remuneration for FTSE 100 high-flyers is often under scrutiny.
Nevertheless, heated debate aside, the well-run company and informed director both need to know the going rate for securing the best talent in the boardroom.
This is not always easy, given the high levels of risk and responsibility which directors assume. How much are you paid? How much should you be paid? And what is a typical benefits package? To negotiate your remuneration package you will need to benchmark what is typical for your industry, location and company size. Here you’ll find a number of useful links to help you come to a decision.
The remuneration committee
The following IoD factsheet outlines the broad terms of reference for the board remuneration committee when considering executive reward.
Directors’ pay and benefits
The IoD Business Information Service subscribes to a number of salary surveys which detail pay by industry and by UK country or region. There are copyright restrictions on how much content we can provide from these sources.
- Job Function Salary Surveys (Croner), inc Directors Rewards, Management Rewards, Marketing Rewards and Sales Rewards.
- Life In the Boardroom: Chairman and Non-executive director survey (MM&K) – covers fees for FTSE, AIM, Private and Public Sector/Nor For Profit companies.
The IoD has compiled an online salary survey collection which hosts a large number of salary surveys.
Remuneration issues
The 2002 Directors’ Remuneration Report Regulations extended the power of shareholders, entitling them to an advisory vote on the remuneration report at each AGM. The 2003 Higgs Review on the role and effectiveness of non-executives led to changes in the combined code dealing with remuneration.
- Executive Remuneration discussion paper 2011 PDF (BIS, 2011), followed by Executive remuneration discussion paper: summary of responses (BIS 2012)
- Directors’ Remuneration Report Regulations – 2002 (legislation.gov.uk)
- ABI Principles of Remuneration (ABI 2013)
- Review of the role and effectiveness of non-executive directors: Derek Higgs and DTI (Jan 2003) PDF
- Guidance on Executive Director Remuneration (ICGN, 2016) PDF
- Guidance on Non-executive Director Remuneration (ICGN, 2016) PDF
- Remuneration Committee – Terms of Reference (ICSA)
Further reading
The IoD’s Information and Advisory Service (IAS) offers a wealth of advice and insight for a non-executive career, such as what your duties will be and what might constitute a conflict of interest.
The topic of executive remuneration is looked at from a number of angles on Director.co.uk:
Are CEOs paid too much?
director.co.uk/are-ceos-paid-too-much-debate-18049-2/
Are bonuses necessary?
director.co.uk/are-bonuses-necessary-debate-20487-2/
How to tackle pay bonuses and rewards
director.co.uk/14416-2-how-to-tackle-pay-bonuses-and-rewards/
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