To avoid the situation where the remuneration committee (consisting of NEDs) is solely responsible for determining the remuneration of the NEDs, the UK Corporate Governance Code (2016) states that the board and shareholders should determine the NED’s remuneration within the limits set out in the company’s constitution.
NED remuneration consists of a basic salary and non-executive directors may receive share awards.
Equity-based remuneration to non-executive directors should be fully vested on the grant date, but still subject to applicable holding periods.
Performance measures remuneration whilst advocated in executive remuneration packages is not generally supported for non – executive remuneration. Organisations such as the ICGN advocate that performance based remuneration for non-executive directors has significant potential to conflict with their primary role as an independent representative of shareowners.