Non-Executive Director (NED) 2009 pay increased by 5.5%

Non-Executive Director (NED) 2009 pay increased by 5.5%
29/01/2010

The median 2009 change in NED total compensation was 5.54%. This was higher than the 1.5 % median increase in CEO remuneration summarised by us in December (see HERE).

Media attention is often focussed on CEO remuneration levels. There has been less attention focused on non-executive director remuneration which can slip under the radar simply because the numbers are smaller and do not provide the same media value.

We analysed the change in non-executive director remuneration from 2008 to 2009 using GuerdonData®.

To validly determine the rate of increase, we look at same incumbent data. That is, we identified the 922 NEDs who were in the same role for all of the last two financial years. Of these, 825 were deemed to be independent. They are drawn from all industries, with ASX 300 company market capitalisation ranging from $35 million to $145 billion (as at 21 January 2010).

The median 2009 change in NED total compensation was 5.54%. The average was skewed significantly higher at 14.54%. This skewing is due to a small number of large percentage increases in fees and/or share-based payments.

100129 table 1

Note that some increases are as a result of increased responsibilities rather than an increase in fees. That is, because we are considering only NEDs that have been a NED in the company for at least two years, they tend to be on average more experienced than a sample that included NEDs that have only been in the job for a year. Hence, as more experienced NEDs they may have been allocated more committee or other roles attracting more fees over the two years being considered.

Increases in cash are primarily responsible for total compensation increases and reductions in share based payments are the main cause of total compensation decreases.

100129 figure 1

Does Industry Affect Compensation Changes?

The health care and consumer staples sector NEDs received the highest median total compensation changes at 8.7% and 9.0% respectively. The consumer discretionary and financial sector NEDs received the lowest median change at 1.0% and 1.9% respectively.

100129 table 2

Does Size Matter?

In general, organisations with larger market capitalisation were more likely to increase director compensation. Chairman increases showed no clear trend with company size.

100129 figure 2