Remuneration of Non-Executive Directors

The participant profile from the NED Survey reveals that 86% are Luxembourg residents, while 14% come from other European countries. Their nationalities include Luxembourgish (33%), Belgian (17%), French (14%), German (8%), other European (15%), and non-European (13%). Age-wise, the majority (51%) are between 51 and 60 years old, followed by 29% aged 61 to 70, 19% aged 41 to 50, and 1% aged 71 or older. The average and median ages are 56, with overall experience averaging 33 years (median 31), and experience as a NED averaging 8 years (median 7).

Many Luxembourg subsidiaries are overseen by NEDs who are executives at their parent companies, with their oversight duties integrated into their roles and compensated through the parent company’s executive remuneration packages.

The remuneration of these NEDs on Boards reveals that 95% are compensated, while 5% are not. Of those compensated, the majority (91%) receive director's fees only (annual allowances), 4% receive both director's fees and attendance fees, 2% receive attendance fees only, 2% receive director's fees with variable remuneration, 1% receive variable remuneration only, and 9% are classified under other compensation categories.

The distribution of Board remuneration across all sectors shows the highest percentage of participants (14%) earns between €15,001 and €20,000, while the lowest percentage (3%) earns between €100,001 and €150,000.

The difference in workload perceptions between companies and Board members highlights a gap in understanding the full extent of directors' responsibilities. While companies acknowledge a moderate increase, Board members report a significant rise, driven by behind-the-scenes activities like preparing for discussions, analysing materials, and participating in specialised committees. These committees, focused on areas such as ESG, risk management, and technology, add to the workload but are often underappreciated by companies. Companies tend to measure workload through visible metrics like meetings, while Board members consider intangible efforts like research and preparation, contributing to the perception gap. Bridging this divide requires better communication, clearer understanding, and enhanced support, such as streamlining processes, improving briefing materials, and leveraging technology to reduce the burden on directors.

The workload of NEDs has evolved over the past two years. From the company perspective, 58% report an increase in workload, 41% believe it has remained stable, and only 1% note a decrease. From the NED perspective, 78% perceive an increase, 22% consider the workload stable, and none report a decrease.

When looking at the perceived extent of workload increases for NEDs from both the company and NED perspectives, there is a variation in views on the magnitude of the changes over time. From the company perspective, 91% report an increase of less than 25%, 7% report an increase between 25% and 50%, and 3% indicate increases exceeding 100%. From the NED standpoint, 47% observe an increase of less than 25%, another 47% report increases between 25% and 50%, and 6% note increases greater than 100%.

The survey provides an analysis of the proportion of Independent Non-Executive Directors (iNEDs) on Boards, categorized into ranges: 0-25%, 26-50%, 51-75%, and 76-100%. The majority of Boards have between 26-50% iNEDs. The distribution is further broken down by company size, showing that smaller companies tend to have a higher proportion of Boards with lower iNED representation, while larger companies exhibit more diversity in the range of iNED proportions. This highlights the varying levels of independence in governance structures across organizations of different sizes.

The survey reveals that women constitute 24% of Board members, while men make up 76%, underscoring the underrepresentation of women. 

Furthermore, efforts to address this disparity show that 30% of respondents report an increase in women’s representation in recent years, 60% indicate plans to further improve representation, and only 16% have established quotas or targets for gender balance in their corporate objectives. These findings highlight the ongoing need for action to enhance gender diversity on Boards.

In conclusion, the survey highlights the complexity of Board member remuneration in Luxembourg, influenced by cultural norms, sector requirements, and organizational priorities. Regulated industries, like finance, often offer higher compensation for added compliance obligations, while less regulated sectors adopt simpler structures. The evolving role of Board members, including strategic oversight and stakeholder engagement, along with specialized committees, adds to their workload, yet much of their effort remains unseen and underappreciated by companies. The report also emphasizes the need to address gender diversity, with women holding only 24% of Board positions, urging companies to prioritize inclusion as a driver of better decision-making and performance.