1st May 2026
On October 20th, 2023, we asked, in these pages, “Should Investment Company Directors be paid more?”. See here. We argued that investment companies often invest in more complex assets than just equities and bonds and require a broad and deep skillset on the part of the board of directors – often in scarce supply (an argument we repeated again last year – see here). Further, we argued that “the time involved in ensuring the companies are run optimally, and investment advisers overseen properly, can be significant.” The last 12-24 months have demonstrated this in spades. We have seen a huge pick up in corporate activity and a number of high profile activist campaigns. All these have demanded a huge amount of time of some boards – far more than might reasonably have been envisaged. So today, we reiterate our call for better remuneration for non-executive directors (NEDs) across the board.
Having been significant supporters of (and, on behalf of our clients, investors in) the investment trust sector via our multi-asset funds for the better part of 2 decades, we know firsthand how much time some directors put into their trusts. One of the problems with assessing whether board remuneration is adequate is the highly variable time required depending on prevailing conditions. As we go on to explain, recently some boards have had to spend huge amounts of time on their trusts, fighting for shareholders and for very little reward.
But first, we know from Investec’s Alan Brierley’s must-read annual “Skin in the Game” report, what the average fees across the sector are. The average fee for a chair of an equity investment company is £51,944. The average fee for an ordinary NED (i.e. not an audit committee chair, or a senior director) is £35,904. The equivalent figures for alternative investment companies are £82,449 and £52,037. Being average figures, there will be NEDs paid less than this, and going through torrid times.
An investment trust invested primarily in liquid large cap equities, with the share price trading close to Net Asset Value (NAV), and with an investment adviser performing well, might not necessitate much work beyond the periodic board meetings and accompanying preparatory work (which we do not want to understate).
But when an activist becomes involved or corporate activity is initiated, the additional time can be significant. NEDs can’t postpone activist campaigns or corporate deals to convenient gaps in the diary. Holidays booked long in advance must be cancelled. Evenings and weekends sacrificed. It has also not escaped our notice that some activists seem to make it a tactic to tie up boards over times of the year when they might reasonably be expecting to spend precious festive time with loved ones. That seems especially cruel. And corporate deals might still fall apart at the 11th hour after months of wasted time.
Some might argue that this is part of the unwritten contract when someone becomes a NED. If something goes wrong, then that’s just tough – the NED should have done a better job in the first place. There is an element of truth to this.
But we think that is far too simplistic. As with any profession, there are some better actors than others. Perhaps some NEDs did accept jobs expecting a cosy part-time role in the autumn of successful careers. Perhaps these NEDs have been complacent. In addition, as we have pointed out in the past, many boards have been slow to correct capital allocation policies in response to widening discounts.
In the summer of 2023, as it was becoming clear that wide discounts were at risk of becoming persistent, we wrote a series of blogs entitled “We Need to Talk About Investment Trusts” (compiled here). Many of our recommendations have been addressed (although there is still work to do). But since then, we have seen the acceleration of wealth management consolidation and a huge increase in compliance burdens amid regulatory change. As we have stated multiple times, this has led to a huge reduction in demand from the wealth management investor community. Aside from activist investors and a few take-privates, there has been no new demand to replace it, and so the supply side is having to do the work to correct the resulting wide discounts. We cannot blame NEDs for this very strong structural headwind.
It is the persistence of these wide discounts that has prompted a much heightened level of corporate activity and activism.
Perhaps NEDs could have responded to widening discounts sooner. Perhaps NEDs with broader and deeper skillsets could have dealt with situations more effectively and with less reliance on expensive additional advisers. Perhaps NEDs with more “skin in the game” would have been more incentivised not to allow discounts to widen quite so much or stay so wide for so long.
Regardless, we now think we need to both adequately reward the current NED community and simultaneously attract new talent. For example, as we argued last week, the sector needs to attract new demand and the pension fund community is the most obvious place to look. We worry about how much expertise exists within the current NED community in working with pension funds.
The simplest way to correct the situation is for higher levels of fixed remuneration, with an increased proportion paid in shares. Variable remuneration – e.g. higher pay when more of the director’s time is needed – could be difficult to structure and be prone to manipulation. We would rather directors be paid an amount that attracts good people and potentially risks looking generous. Indeed, in a perfect world, a good board would be overseeing a well-run company, trading around par, with no need for long hours, or working weekends and festive periods.
This is not about endearing ourselves to the current NED community – although we do think too much mud has been slung their way and too little recognition given for large number of NEDs who give their all. Ultimately, we believe higher levels of pay – along with increased alignment – will also lead to greater expectations of boards and to better long-term outcomes for shareholders.
Ben Conway – Head of Fund Management
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