SIRDAR
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Determining Director Fees

Non-executive director fees are the fees paid to persons who serve on a company’s board of directors in a
non-executive position, and are usually paid on a retainer basis. These directors often do not participate in day-to-day operations, but instead give strategic counsel and supervision.

Many aspects can impact the level of fees paid to the board members. It is important to recognise all of
these factors from the point of view of the board determining the fees as well as the individual’s point of view.

Determining Factors

Non-executive director fees can vary greatly depending on the company’s size and sector, the director’s
degree of experience and competence, and the time commitment needed for the position. Non-executive directors may also receive additional compensation for attending board meetings, participating in board committees, or offering specialist advice.

It is significant to note that the precise fee schedule and amounts are decided by the board of directors of the organisation and are governed by the rules and laws of corporate governance in the relevant jurisdiction.

Fees per Organisational Type

Determining director fees in a public corporation, a private firm, or a charitable organisation requires taking unique factors into account.

Listed Entities

The board of directors of a publicly traded firm often establishes a structured process for assessing and approving pay packages for all board members in order to calculate director fees. In order to verify that the compensation is reasonable and acceptable, this procedure may involve engaging with shareholders and other stakeholders, evaluating data on director compensation for comparable businesses in the same industry, and hiring a compensation expert to offer advice and direction. The ultimate objective is to create a fair and competitive remuneration structure that takes into account the time, abilities, and knowledge needed to serve on a board of directors for a publicly traded firm.

Private Businesses

Determining non-executive director remuneration in a private company may be a complicated procedure that depends on a variety of criteria, including the firm’s size, industry, and overall financial success, among others. However, some popular techniques for calculating non-executive director remuneration include taking into account the time commitment necessary, the level of competence of the director, and the function and duties of the job. When determining non-executive director remuneration, it is also critical to analyse industry market norms and trends.

Not-for-Profit Organisations

Non-executive director compensation at these is often lower than in for-profit businesses since these positions are frequently filled by volunteers. It is critical to examine the organisation’s financial resources and budget, since this will help to evaluate the entire pay package offered. The experience and competence of the non-executive directors, as well as the time commitment necessary for the function, should be considered.

Negotiating Director Fees as an Individual

Non-executive director fees might be difficult to negotiate. Preparation, adaptability, and a collaborative
approach are necessary for successful negotiating. Here are a few pointers to consider when negotiating:

  • Do your homework: It is critical to conduct research about the normal fees for non-executive
    director roles in your sector. You may compare compensation for non-executive directors with
    other firms of comparable size and industry.
  • Understand your worth: Consider what unique abilities and expertise you bring to the table that
    set you apart from other non-executive directors. Understanding your worth will support you in
    negotiating.
  • Be adaptable: Be open to negotiation and prepared to compromise. While you may not receive
    everything you want, it is critical to be flexible and collaborative in order to find an arrangement
    that works for all sides.
  • Discuss long-term value: Think about how you can provide ongoing value to the organisation,
    such as through industry contacts or experience. This will assist to demonstrate why you are
    worth the investment.
  • Obtain expert help: If you are unsure of how to negotiate your compensation, obtain
    professional assistance from someone who is involved in the boardroom and recruitment
    industry.

 

Non-executive directors who are adequately rewarded for their time and experience are more likely to
contribute meaningfully to the success of the board and the organisation.