UK: PwC report on non-executive directors

PwC has published the 2008 edition of its annual report Non-Executive Director Practice and Fees, which is available for purchase from PwC (see here). A summary of the main findings has, however, been provided in a press release available here. Highlights from the report include (to quote directly from the press release):

Formal review of corporate governance and board effectiveness is becoming increasingly prevalent in UK companies, with 84% of respondents conducting annual performance reviews of their board. In addition, the average [non-executive] director’s time commitment has risen from 15 days in 2003 and 20 days in 2007 to 21 days in 2008.

Fee levels – fee levels continue to be influenced by both company size and time spent doing the job. The increase in fees for directors and chairmen is less pronounced than in previous years (an increase of 15.6% for directors and 25.0% for chairmen in 2008). 

Terms of appointment – there has been little change to policy regarding non-executive director appointments since last year. Most (78%) NEDs are appointed for an initial three-year term. 

Board structure – Analysis of the percentage of non-executives on the main board indicates that a 50/50 ratio of executive/non-executive is the median practice, although larger companies have a higher proportion of non-executives to executive directors (60/40 ratio).

Outside appointments – this year the survey showed a difference of market practice between smaller and larger organisations. In companies with revenues up to £500m, over half (51%) the companies have no executives serving on another companies’ board and are less likely to encourage executives to accept a non-executive appointment. Almost two thirds (62%) of companies with revenues over £500m have executives serving on other companies’ boards. The percentage was 52% and 59% in 2007".

Notes:

[1] The report is based on a survey of 155 companies and information in the most recently available annual reports of 1,500 quoted companies with year ends from September 2006 to February 2008.

[2] An overview of the 2007 report is available here.