Page 132 - SBL Integrated Workbook STUDENT 2018

Chapter 11

4.4 Components of directors’ remuneration package

 Basic salary – e.g. based on the skills required to do the job,
individual’s performance and market rates.

 Performance related – e.g. dependent on the achievement of
performance measurement criteria.

 Pension – only basic salary is pensionable.

 Benefits in kind – e.g. non-wage compensations in addition to their
normal wage and salaries.

Non-executive directors' remuneration

To avoid the situation where the remuneration committee (consisting of
NEDs) is solely responsible for determining the remuneration of the
NEDs, the UK Corporate Governance Code (2010) states that the
board and shareholders should determine the NED’s remuneration
within the limits set out in the company’s constitution.

 NED remuneration consists of a basic salary and non-executive directors may
receive share awards.

 Equity-based remuneration to non-executive directors should be fully vested on
the grant date, but still subject to applicable holding periods.

 Performance measures remuneration whilst advocated in executive
remuneration packages is not generally supported for non-executive
remuneration.

(Note: Organisations such as the ICGN advocate that performance- based
remuneration for non-executive directors has significant potential to conflict with their
primary role as an independent representative of shareowners

Illustrations and further practice

Now try TYU question 2.

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