FRC Issues Updated Guidance On Non-Executive Director Pay To Strengthen Governance Flexibility

The Financial Reporting Council (FRC) has issued updated guidance on the remuneration of Non-Executive Directors (NEDs) to support the application of the UK Corporate Governance Code 2024.

The update, which does not change the Code, clarifies that the “comply or explain” principle allows companies flexibility in structuring NED pay. It confirms that Boards may pay part of NED fees in shares, provided they explain their approach transparently. The guidance recognises that companies may encourage NEDs to hold shares to align with shareholders, while ensuring independence by avoiding performance-based pay. FRC Chief Executive Richard Moriarty said the update reinforces flexibility while ensuring transparency and independence in governance practices, adding that companies should use this flexibility thoughtfully to adopt approaches suited to their specific circumstances.