LONDON, March 7, 2024 – European boards could be missing out on a top global talent pool of non-executive directors with the skills required for this increasingly demanding role, as current pay lags behind required levels. That’s according to the latest Non-Executive Directors pay levels survey by WTW, (NASDAQ: WTW), a leading global advisory, broking and solutions company, in partnership with ecoDa.
The increasing regulatory demands on non-executive roles is prompting the need for the review and future proofing of pay. The level of expertise, time commitment and reputational risk associated with boards has significantly increased, the survey found.
Over nine-in-10 (92%) non-executive directors agree that the complexity and time commitment of their roles has increased over the last three to five years, while four-in-five (81%) believe they are not adequately compensated for their role.
Average compensation paid to non-executive directors varies considerably across European countries, with the median level among largest companies of main European indexes around Euro 150,000. Whereas in the US, average S&P 500 companies non-executive director compensation was $310,000 (Euro 286,000) in 2022, meaning that European companies might not be able to compete with, and attract directors from their US counterparts.
Piia Pilv, Senior Director, Executive Compensation and Board Advisory at WTW, said: “The current structure and quantum of non-executive directors’ remuneration in Europe is less than adequate for attracting and retaining the required candidates, particularly given the wide discrepancies between European countries and a significant pay gap between boards in Europe and the US. This could lead to deterioration of business competitiveness in Europe, as talented individuals opt for more rewarding opportunities globally.”
The report recommends that board fees should be determined by benchmarking against relevant peer groups of companies, taking into consideration the company’s size as an indicator of pay levels for non-executive directors. Additionally, companies could by also look at the amount of time required for directors to perform the board mandate,
Manuel Montecelos, Senior Director, Executive Compensation and Board Advisory at WTW, said: “If we want to ensure boards are equipped with the best experts, we need to review non-executive pay structures and future proof competencies and skills for non-executive directors, in the same way that we manage other talent pools.
“Fair and socially responsible pay is needed for non-executives in order to attract and retain the right candidates with the specialist expertise required to fulfil their roles.”
Manuel Montecelos | Senior Director, Executive Compensation and Board Advisory at WTW
“In the last five years, non-executive board members have required more technical expertise, an increased time commitment and taken on more professional risk, while remuneration has remained unchanged. Fair and socially responsible pay is needed for non-executives in order to attract and retain the right candidates with the specialist expertise required to fulfil their roles. Otherwise, companies risk missing out on top talent”.
Data was collected from 380 companies across 12 European countries as part of WTW’s Non-Executive Directors European pay levels survey.
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ecoDa member institutes that contributed to the data collection:
