We are pleased to publish our latest report – Better Boards for Growth Companies , written in partnership with the Quoted Companies Alliance. The report is based on a study that interviewed over 100 non-executive directors (NEDs) of smaller public companies.
Our survey gathered insights from the NED community on NED compensation and highlights the challenges growth companies face when it comes to attracting top talent to their boards. The report calls for a reassessment of compensation practices, greater flexibility in corporate governance policies and a shift in cultural attitudes towards entrepreneurship and risk.
A summary of the results:
- The role of an NED in a smaller company is very different from that of an NED in a larger and more mature company. A key takeaway is that a smaller company NED is expected to help set and execute strategy.
- 60% of NEDs have actively declined a role. The following factors play a role:
- 98% indicated that the workload and risk profile have increased significantly in recent years.
- 81% indicated that average pay is not considered representative of the work and risk profile associated with the role.
- 95% stated that compensation packages are not aligned with other markets.
- Investor perception was seen as the main barrier to compensation.
- As part of the survey, we also explored more creative ways of compensating NEDs, such as issuing shares and granting options, which is already happening in some cases but polarizing opinions. The survey also raised concerns that board selection had become a “check box” task and noted that diversity had become a controversial issue.
A key theme of the report was that the market has moved towards a gilded governance where board selection and compensation decisions are driven by top-down politics as opposed to strategic outcomes. Companies are reluctant to deviate from best practices for fear of backlash from proxies and, in some cases, shareholders who set their guidelines on a “one size fits all” basis and blackmail companies with negative voting recommendations. These policies undermine the flexibility that corporate governance policies provide and the flexibility that growth companies require. The individual circumstances and needs of companies should be taken into account.
