UK vs US: THE GROWING GAP IN NED COMPENSATION

“Companies will struggle to recruit NEDs who have not already generated substantial wealth from previous roles, if fees are not sufficient”

A new report by consultancy firm Alvarez & Marsal found that ‘payments to UK non-executive directors have fallen more than 10 per cent in real terms over the past decade.’ According to an article from Financial Times journalist Ellesheva Kissin, this drop in remuneration raises concerns that ‘London-listed companies will struggle to attract experienced board members’. Non-executive pay now lags behind consumer price inflation by 11.8%, the report states. 

The issue appears to be a UK-centric one: the report found that US companies of a similar size were offering fees three times higher than their FTSE 100 equivalent. UK government initiatives to boost the country’s competitiveness have so far failed to have any significant impact. 

Most recently, the Financial Reporting Council updated its guidance on non-executive pay, including ‘encouraging greater share-based remuneration’, aiming to ‘enhance the ability of UK-listed companies to attract the highest calibre of talent on the global stage.’ 

One thing looks certain - UK companies risk losing their competitive edge to their US counterparts if this discrepancy leads to a talent drain at the highest levels.