Independent Directors’ Compensation doubled in last five years

Compensation for Independent Directors at India’s leading blue-chip companies has significantly increased as their roles become more challenging due to growing business complexities, heightened stakeholder scrutiny, and stricter regulatory requirements.

According to a study by executive compensation advisory firm Exec-Rem Advisors shared with The Economic Times, the median compensation for Independent Directors in Nifty 50 companies has more than doubled to Rs 72 lakh in FY23 from Rs 35.5 lakh five years ago. In FY23, Independent Directors in the 75th percentile of Nifty 50 companies earned an average of Rs 1.04 crore, up from Rs 67.6 lakh in FY18. At the lower end, companies in the 25th percentile paid Independent Directors an average of Rs 43.8 lakh, more than double from Rs 19.18 lakh in FY18.

The study, which analysed 37 Nifty 50 companies, excluding public sector undertakings and banking and insurance firms, revealed that while compensation increases have occurred across the board, those in the lower quartile have experienced a larger jump.

The commission or fixed fee for an Independent Director ranged from Rs 24 lakh to Rs 1.65 crore in FY23, with a median of Rs 56.4 lakh. The median commission and fixed fees have seen an 115% increase from Rs 26.25 lakh in the last five years.

The median sitting fee per Independent Director has nearly doubled since FY18, from Rs 4.53 lakh to Rs 8.94 lakh. Independent Directors are also increasingly spending time on aspects such as ESG and cybersecurity, contributing to their growing responsibilities.