PwC/IoD Channel Islands non-executive director survey - July 2011

Pressure builds on non-executive directors, with increased reputational risk, increased time commitment and increased regulatory burdens but little change in pay, says first PwC/IoD Channel Islands non-executive Directors report.

The financial crisis has put significant extra pressure on non-executive directors, with average time spent on the job expected to rise over the next year by 6 days to an average 26 days.  The extra time commitment has been driven by risk and regulatory requirements combined with greater business challenges, according to the PwC/IoD Non-executive Director survey 2011.  

Given the increased time demands and reputational risk, only a third (30%) of non-executives consider their fees too low, perhaps more interesting is that 61% of non-executives surveyed consider their fees to be adequate and 65% do not envisage a fee increase over the next financial year.

Perhaps reflecting the lower priority that non-executive directors place on fees, the report shows that 60% of non-executives feel the role has become more attractive over the past few years due to its challenging nature and the ability to add value.

For those non-executive directors who think the job has become less appealing, the majority cited the increased regulatory burden and reputational risk associated with the role.  Indeed non-executive directors regard regulatory requirements as the biggest hindrance to their ability to do their job (36% of respondents) followed by time restrictions (21%).

At breakfast briefings, held in both Guernsey and Jersey to discuss the results a number of questions were addressed to a panel of experts.   Chairing the event were survey authors, Paul Silcock and Nicola Mills. The panel in both islands included local representatives of the Non-executive director community, the Institute of Directors and Sean O’Hare remuneration partner from PwC London.

Key topics of interest were:

  • “How do Non-executives Directors accepting appointments to new funds/companies avoid the perception of being nodding donkeys”

and

  • “In an era where companies are security conscious and reluctant to release information without appropriate safeguards how is it appropriate that any and all information is released to non-executive directors without a second thought as to how and where they receive it?”

Both questions resulted in a reasoned debate amongst the panel with the view being that for investment managers who have invested significant time into establishing a company/fund and obtaining initial investment it can be hard to accept challenge from someone they see as an outsider, however often it is these challenges that are needed and ultimately it is down to the individual non-executives to police their own appointments and ensure that if their opinions are not valued then they take the necessary action.

In relation to security of information, this is a constant issue for all organisations but something that is evolving and many non-executives have received additional secured e-mail addresses for specific companies on which they are a representative or access to companies systems via a log in where all information is stored.  

Other findings:

  • Selection criteria for companies.  Experience is the most important selection criterion for companies when appointing non-executive directors.    
  • Selection criteria for non-executive directors.  For candidates considering a non-executive position, the quality and reputation of the Company/Investment Advisor/Board is the most important factor.  In second place is the track record of the Sponsor and expertise and independence of the Board.  Realistic fees for time incurred are considered by 21% of respondents.
  • Performance evaluation.  66% of respondents are subject to annual board evaluations but only 9% of those have the evaluations externally facilitated.  

This presentation gives some of the highlights that Paul and Nicola covered in the breakfast briefings. If you have any queries, please do not hesitate to contact us.