UK non-executive directors' fees jump 21 per cent

Fees for non-executive directors at leading UK companies rose by one-fifth over the past year and are likely to increase much more amid growing investor scrutiny, rising workloads and greater focus on corporate governance.

A survey published yesterday by pay consultancy Incomes Data Services said the average pay increase for a UK non-executive director (NED) was 21 per cent and rising.

"While these figures are based on relatively small numbers, as companies do not review NED fees on a regular annual cycle they do indicate that rates are escalating and that over the next few years many NEDs may end up receiving substantially more money," the IDS said.

Fees ranged from as low as £5,000 at Anglo-French sub-sea tunnel operator Eurotunnel to £95,000 at Vodafone Group Plc, IDS said in its compensation review study.

The median annual fee for a non-executive director in a FTSE 100 and FTSE 250 firm was £42,000 and £30,000 respectively.

The findings are based on research into the pay of more than 1,400 non-executive directors of FTSE 350 companies based on company accounts with year-end dates running from January 2004 to March this year. IDS said telecoms operator Cable and Wireless, construction group Balfour Beatty, aerospace firm Cobham and electricity utility Scottish Power were among companies that had reviewed fees for their non-executive directors. All said the current corporate governance environment and increase in workload was the reason for fee rises, IDS said.

IDS said more stringent corporate governance in the wake of the government-sponsored study by banker Derek Higgs, which set out standards and best practices, had led to improved disclosure in corporate accounts.

For example, British Airways stated in its accounts that non-executive directors were paid £600 for every board meeting attended through the year, on top of a basic annual fee of £27,000.

The survey found a number of companies making provisions for non-executive directors to be remunerated with shares, an interesting indicator not least for investors who monitor director dealings for potential leads on future share prices.

British telecoms firm BT Group recommends a voluntary purchase of £5,000 worth of shares each year, at Barclays Plc 20,000 of the standard annual £50,000 fee is to be used to buy shares in the company, while at glass maker Pilkington Plc non-executive director fees consist solely of shares.