We are pleased to share our latest report – Better boards for growth companies, written in conjunction with the Quoted Companies Alliance. The report is based on a study, which surveyed over a hundred Non-Executive Directors (NEDs) of smaller quoted companies.

Our survey gathered insights from the NED community regarding NED remuneration and highlights the challenges faced by growth companies in attracting top talent to their boards. The report calls for a re-evaluation of remuneration practices, greater flexibility in corporate governance guidelines, and a shift in cultural attitudes towards entrepreneurialism and risk.

A summary of the findings:

• The role of a smaller company NED is very different to that that of a NED in a larger and more mature business, with one key takeaway being that a smaller company NED is expected to assist in the setting and delivery of strategy.
• 60% of NEDs had actively turned a role down, the factors that play into that are:
  • 98% said that the work required and risk profile has increased significantly in recent years.
  • 81% said that average remuneration is not considered representative of the work and risk profile attached to the role.
  • 95% said that remuneration packages are not aligned with other markets.
  • Investor perception was considered the main barrier to remuneration.
• As part of the survey, we also explored more creative ways to remunerate NEDs, such as issuing shares and granting options, which is already happening in some instances, but polarises opinion.  The survey also highlighted concerns that board selection has become a “box ticking” exercise and indicated that diversity has become a divisive topic.

A key theme coming out of the report was that the market has moved towards gold-plated governance where decisions about board selection and remuneration are driven by top-down policy opposed to strategic outcomes. Companies are hesitant to deviate from best practice, for fear of backlash from proxy agencies and in some cases, shareholders, who are setting policies on a “one size fits all” basis and holding companies to ransom through negative voting recommendations. These policies undermine the flexibility that corporate governance guidelines provide and the flexibility that growth companies need. The individual circumstances and needs of companies should be acknowledged. Equally, companies must ensure transparency of dialogue around decision making rationale and build trust.