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Structuring a Board Remuneration Policy

The compensation of the board of directors is addressed by board remuneration. The focus of remuneration policies for directors is to ensure their mutual existence. This is to ensure their skills and time are valued. The performance metrics aim to gain an edge on a value-based proposition.

Directors` insight is central to organizational sustainability. The board of directors is responsible for strategic planning. Their diverse competencies ensure they lead organizations on a decisive trajectory, considering their wealth of experience. To remain at the top of the game, companies must ensure their measures are competitive and globalized.

For directors to meet the foregoing standards, the below pointers provide the basis for a board remuneration policy:

  • Pay-for-Performance – is a concept that links remuneration to meeting strategic goals and providing value to stakeholders. The compensation is based on long-term performance periods. It is reviewed regularly to meet the progressive stakeholders’ goals.
  • Competitive basis – the metrics are guided by market forces. It ensures that the best market rate is identified to attract great talents. Identification of talents is based on qualifications, the scope of the mandate, and responsibilities. Competitive remuneration ensures retention of the best professionals in the industry.
  • Transparent remuneration policy – the policy is aligned with best corporate governance practices. The central aspect is governed by what is best for the organization in developing the policy.
  • Equal-Pay – the policy is based on ensuring board compensations are fair and non-discriminatory. Boards of directors do not have considerations for gender, age, religion, culture, or race in remuneration structuring.
  • Suitability basis – the policy promotes incentives for members. Committed and dedicated members’ stand out to benefit from the policy. Constant monitoring is required under this policy to ensure that the director’s independence is upheld.

In developing an effective remuneration policy, we observed a number of good governance principles, including accountability, transparency, ethical leadership, and safeguarding stakeholders’ best interests. Before a company’s remuneration policies take effect, shareholders must approve them. Further, it is prudent to disclose the directors’ remuneration in the Company`s Annual Financial Statements.