What is the right price for a Non-Executive Director?

The role of the Non-Executive has become increasingly important as, in many cases, they are the only Directors considered truly independent and, as a result, the only Directors that the shareholders and the regulators can rely on.

For this new-found role and responsibility, they are required to be:

more active,

more interventionist,

take more initiatives,

ask more questions,

probe more deeply,

more knowlegeable about their companies,

identify all the risks inherent in the businesses,

be more independent.

These new responsibilities and this new prestige, they also have greater responsibilities and, as a consequence, greater accountability.

As a result, they are required to spend far more time and resources to do their job better.

Consequently, some basic commonly agreed terms and conditions and parameters for Non-Executive Directors would be welcome, including:

sitting on no more than 3 Boards at a time,

each Board would take between 50 and 60 days each,

not more than 6 to 8 formal Board meetings per year,

payment of no less than $75,000 per Non-Executive Director (approximately $1,500 per day),

out of pocket expenses incurred in executing their job would be paid by their companies,

expenses policy for the Board would be set by the Audit Committee,

the Audit Committee would be made up exclusively of Non-Executive Directors,

if terminated, their fees would continue to be paid for a period of six months.

While these are only general parameters, and not necessarily comprehensive or complete, they are a good beginning to establish a group of professional Non-Executive Directors, which will be independent and have the time to execute their functions professionally and comprehensively.

By Onésimo Alvarez-Moro