Erevena is launching the second year of our Non-Executive Remuneration Survey, looking at compensation trends for Independent Directors in high growth businesses.
Last year, we launched the survey to create a well-needed data source for Non-Executives in private companies, particularly venture-backed companies. Whilst Non-Executives are a mainstay of public companies and are used heavily in private equity backed businesses, the venture capital space had been slow to utilize the experience of Non-Executives. Where they were used, funds often leant on previously exited CEOs or founders, remunerating them solely through shares.
The more systematic use of Boards and Non-Executives is maturing in this sector, however. Founders have quickly understood the benefits of having experienced and independent executives around the Board table. Non-Executives provide an access point to talent and experience beyond what young companies can often afford in their Executive Team. Having access to senior people with specialist sector knowledge, or the understanding of scaling or exiting/ floating a company is of huge benefit. Beyond this, the benefits of having a neutral voice and coach around the table, helping to navigate an often complex and sometimes ill-aligned shareholder base is also a massive help. Having an experienced NED or Chairman to help unite a Board around a strategy; and leaning on their expertise to drive a company forward can make an enormous difference to fast-growing businesses.
At the same time, there is an increased appetite from the community of Non-Executives to diversify their portfolios and combine listed NEDs with some smaller, more equity driven activities. Non-Executive roles in the public domain continue to be more and more acutely focused on governance, with a huge burden of responsibility. Recent headlines like the collapse of Carillion only highlight the level of responsibility public directors now undertake. The appetite to be more involved in growth and leverage skills and experiences to help new and innovative companies march forward is appealing, and we have seen a significant uptick of interest from high profile public NEDs in private and venture-backed assets.
Compensation for this work remains opaque. Historically equity-only awards were common, but many founders and investors have found that the exchange of cash both focuses the mind, and eases a founder’s ability to demand time and activity from their NEDs, in a way that equity only packages sometimes didn’t. Moving towards a more uniform system of remunerating NEDs will help set expectations based on the size of asset and funding raised and will help founders and funds have a benchmark for how to pay Independent Directors and Chairs across their assets. We’re very grateful for the time and effort taken by each participant and hope to create a helpful reference point for NEDs and Chairs looking to work with growth companies, and for founders and funds, looking to diversify their boardroom.