GUIDELINES FOR
DIRECTORS’ REMUNERATION
The board of directors has both executive and non executive directors. Executive directors have both executive and board duties to perform while non executive directors have only board responsibilities. Therefore both types of directors vary in the responsibilities and authority they have in the company affairs. Thus the non executive directors devote very little time to company affairs ( only attend board meetings, committee meetings of which they are members or sometimes pay a visit to the company premises for getting knowledge of how things are done).
The board membership, irrespective of executive or non executive membership, is very crucial in the governance and management of the company. However, as the duties and responsibilities of directors vary according to their type of directorship; the rewards should also match the responsibilities carried out and be in line with the performance shown over period of time.
Board membership carries responsibilities that involve a lot of risks, and no body will be motivated to set on the board unless there are some justifiable lucrative rewards for being on the board. So directors, whether executive or non executive must be remunerated however the vital question will be how?
As is clear from the roles played by executive and non executive directors, the difference in duties, responsibilities and accountability require different remuneration practices for both types of directors.
SETTING DIRECTORS’ REMUNERATION
For setting directors’ remuneration, the board must form a Remuneration Committee. A prior approval from the shareholders of the members on the committee is recommended. However, when it is not possible for solid reasons, ...