Performance-based pay should be abolished: ICGN

Non-executive directors’ pay should consist solely of a combination of a cash retainer and equity-based remuneration, according to the International Corporate Governance Network’s new guidelines for non-executive director pay crafted over the past several years in consultation with, and on behalf of, many of the largest global shareowners.

Executive director of ICGN, Carl Rosen, said among the agreed-upon themes were that non-executive director equity remuneration should be immediately vested and not performance-based. ICGN also has a preference against the use of options.

The cornerstone of non-executive director remuneration should be alignment of interest through the attainment of significant equity holdings in the company meaningful to each individual director, according to the guidelines.

Key aspects of the guidelines include placing an emphasis on non-executive alignment of interest with long-term owners; opposing the use of performance-based remuneration for non-executive directors; clear disclosure and the establishment of ownership guidelines; and some flexibility for companies to implement the principles in ways consistent with their unique circumstances.

It also says that non-executive directors should not be eligible for retirement benefits.

The ICGN is a not-for-profit body with members from more than 45 countries representing funds under management of about $9.5 trillion.

To access the guidelines click here