Director Remuneration Reviews

Demonstrating Transparent Decision Making

Director remuneration reviews provide the board with the opportunity to demonstrate a commitment to good governance.  A strong, transparent approach to remuneration decisions can stimulate good governance practices across an organisation.  Remuneration should be designed to compensate directors for the value they add to the organisation taking into account the time, effort and skills they bring to the board, whilst reflecting the responsibility and legal liability a director assumes on behalf of shareholders/members.  Remuneration may also serve to incentivise, helping to attract and retain talented and experienced directors.

Decisions about director remuneration should be transparent and an external review ensures an open, objective and professional assessment of remuneration.

An Effective Governance Director Remuneration Review considers the following to assess director remuneration:

• Fee increases over time allowing for indexation, industry/sector trends and inflation;
• Remuneration differentials between positions on the board (Chair, Director, Committee Chair, Deputy Chair);
• Committee fees and allowances;
• Benchmark data (the organisation against like entities and comparable standards and rates);
• Fee structures and payment methods;
• The extent to which remuneration attracts, retains and motivates directors;
• Legislative and regulatory requirements;
• Stakeholder expectations;
• Risk exposure of directors;
• Time investment of directors, committee chairs, deputy chair and chair.

For more information on how Effective Governance can help with reviewing director remuneration at your firm, contact us.

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