The FTSE is a hugely important index which tracks the performance of the largest companies in the UK. It’s made up of 180 individual stocks, including household names such as BP, Tesco and Vodafone. As well as being a useful benchmark for investors to gauge how different sectors are performing, it also provides a good indication about how well certain industries are doing.
For example: if you work for one of these companies then you could be earning big bucks! But what exactly do non-executives get paid? And what kind of experience do they need? In this post I’ll explain all that and more…
FTSE Chair Remuneration
According to Spencer Stuart average total remuneration for part-time chairs of FTSE 350 companies is £372,980, a decrease of 10% over the past year and the most significant fall in the past seven years. The decline returns total chair remuneration to 2016 levels.
A similar change is observed in the average chair fee, which decreased by 6%, arriving at £387,019 in 2021 compared to £411,406 in 2020.
FTSE Senior Independent Director (SID) Remuneration
Most UK companies pay an additional fee to their Senior Independent Directors (SID). A SID is appointed to provide a sounding board for the chairman and to serve as an intermediary for the other directors when necessary.
Most companies (93%) offer an average additional fee of £22,246 for the senior independent director role, a 3% reduction compared to 200 (£23,015). The fees range from £2,000 at International Public Partnership to £83,838 at Experian.
The average total fee for SIDs is £115,709, 5% less than last year’s average of £121,389, marking the first reduction in the past six years. Senior independent directors who served the whole year received an average total remuneration of £111,994, including the basic and additional fee for the role plus committee membership when applicable.
FTSE Non-Executive Director Remuneration
Basic (base) non-executive retainers have increased by 2%, from £69,606 in 2020 to £70,785 in 2021. This rise keeps up with a trend identified since 2014, and it is the highest average fee recorded to date.
Additional remuneration is paid for Committee Chairs and members as noted below.
Small-Cap Chair & Non-Executive Director Remuneration
According to Alvarez & Marshal Chairs serving on FTSE SmallCap companies earned an average of £143,500. For Chairs for lower quartile businesses £119,500 and upper quartile businesses £173,300.
For Non-Executive Directors the average is £60,000 with lower quartile businesses paying £54,000 and upper quartile businesses £69,000
Non-executives with the most experience can earn up to £500k a year.
So, what are these non-executives making? The highest paid role in the UK is that of a non-executive director (NED). NEDs can earn anything from £100k up to £500k+ a year – that’s more than the Prime Minister, CEOs and even footballers.
To put this into perspective, let’s take a look at how much NEDs make compared to other senior executives:
An average FTSE 100 CEO earns £4m annually, while an average FTSE 250 chief executive takes home around £1.2m each year. This means that on average they earn twice as much as their FTSE 100 counterparts and almost 10 times more than their public sector peers!
But it is important to note that a non-executive director within the FTSE does not work in a full time capacity but rather a typical 1-2 days per month.
Averages
The average non-executive director of an FTSE 100 company earns £525,000 a year, according to the High Pay Centre.
Average time commitment by FTSE directors falls to 2.5 days per week
The average time commitment by FTSE directors has fallen to 2.5 days per week, according to new research from the World Economic Forum (WEF). This is a slight reduction from the previous year, when it stood at 2.57 days. The WEF also found that non-executive directors spend an average of 0.94 hours per week on board matters and 0.96 hours on company strategy and policy matters, while executive directors spend an average of 1.89 hours per week on board matters and 1.92 hours on company strategy, policy and operations
Non executive directors should be reviewing their own time commitments every year
The IoD recommends that non-executive directors should review their time commitments every year. This is a good idea as it means that you can re-evaluate the roles of each board and determine whether any time spent on a particular activity is still required or if it could be allocated to someone else.
There are a number of ways in which non-executive directors can ensure that they are spending their time effectively:
- Do your homework before joining a board – know what you want to achieve, then aim for those goals when considering your position.
- Make sure you have clear expectations around executive pay (or individual remuneration), as well as company policy on shareholder relations and corporate social responsibility (CSR). These areas are often complex, so it’s important to understand how companies operate in these areas before joining one.