Is variable compensation appropriate for independent directors?

“The ability to provide an objective and increasingly specialized judgment, along with a contribution derived from a mix of skills, experience, seniority and relationships, are qualifying elements for independent directors in the American and Anglo-Saxon experience (UK and Australia)”, commented Andrea Di Segni, Managing Director at Morrow Sodali, in an interview with the Harvard Business Review October 2018 in relation to the proposal to introduce variable compensation for non-executive board directors. To attract the most qualified board members, Andrea Di Segni recognises a growing trend to include remuneration packages with competitive compensation. Given restrictions imposed by proxy advisors and some large investors, issuers are debating how to define such remuneration schemes and the pay structure, including lock-up periods to help ensure board members are committed to long-term value creation.

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