June 8, 2010
ICGN’s Global Guidelines for Setting Director Pay
– Broc Romanek, CompensationStandards.com
As noted in this press release, the International Corporate Governance Network recently issued a set of guidelines for setting non-executive director pay. The guidelines are intended to be of general application around the world, irrespective of legislative background or listing rules.
Key aspects of the guidelines include:
– The policy places an emphasis on non-executive director alignment of interest with long-term owners.
– The policy draws a distinction to differences to executive remuneration, particularly related to performance-based remuneration. The policy opposes the use of performance-based remuneration for non-executive directors.
– The policy examines the tools of remuneration, and favors solely cash retainer and equity, with a preference against the use of options.
– The policy provides flexibility for companies to implement the principles in ways consistent with their unique circumstances.
– The policy calls for clear disclosure including the philosophy of the non-executive director programme.
– The policy calls for equity to be vested immediately but subject to holding periods.
– The policy suggests companies establish ownership guidelines for non-executive directors.
– The policy states non-executive directors should not be eligible for retirement benefits.