Director remuneration

The argument for a higher level of remuneration for non-executive directors is that it will attract a higher calibre of candidate which, in turn, will result in increased...

The argument for a higher level of remuneration for non-executive directors is that it will attract a higher calibre of candidate which, in turn, will result in increased business performance.

The figures here do not cover a long enough period or enough businesses to draw concrete conclusions. They do, however, highlight that there is no simple correlation between the level of remuneration and business performance.

The co-operatives that grew their gross sales the most over the past three years tended to be those that compensated their non-executive directors at a lower level.

Does the spend on non-executive directors have any bearing on an organisation's gross sales?
Does the spend on non-executive directors have any bearing on an organisation’s gross sales?

 

Midcounties Co-operative, which remunerates at an average of £8,035, a fifth of the level of its plc competitors, was the fastest growing retailer. Chelmsford Star Co-operative was the second fastest growing retail co-operative, and, in line with its size, has the lowest remuneration package for directors among retailers – £4,049.

The biggest growth in agriculture was from the Agricultural Trading Centre and Woldmarsh. Both are at the smaller end of the sector and, although they compensate in line with competitors, the level of remuneration received by directors is correspondingly low – £9,808 for the former, £2,443 for the latter.

The high-growth co-operatives do not indicate, then, that growth comes from heavyweight non-executive directors attracted by large levels of remuneration.

The four co-operatives displaying the slowest growth or a contraction in gross sales during the last three years were retail co-operatives. Though they compensate their directors at comparatively low levels, this is no different from retailers such as Midcounties that have seen considerable growth over the last three years.

Among the agricultural co-operatives that remunerate at the highest levels – First Milk at £35,539, Milk Link at £66,929 and Mole Valley Farmers at £30,063 – there is some indication that the compensation is delivering financial returns, but not necessarily bringing large scale growth.

First Milk grew its gross sales by 6% and Mole Valley grew by 24% over the three years. Milk Link is less clear. The board took the decision last year to merge Milk Link with the international dairy co-operative Arla, which may be an important decision that will deliver significant returns to its farmer members in time.

Looking at business gross sales and remuneration over the last three years does not provide concrete conclusions. It does indicate, though, that the level of remuneration received by non-executive directors does not have a significant bearing on the growth of the business.

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