Remuneration of Board Members

Background

Board members – both executive and non-executive – have a vital role. They are responsible for the good governance of an organisation, establishing and monitoring the effectiveness of the system of internal control and setting a tone from the top.

The States have a strong interest in a range of entities, as shareholder, sponsor and funder, in ensuring that there are appropriate and transparent arrangements for remuneration of Board members so that public confidence is maintained.

The C&AG has previously highlighted concerns about, and made recommendations relating to, the oversight of:

• States owned companies;
• arm’s length organisations; and
• human resource matters.

Scope

This report reviews the arrangements that the States have in place to oversee and secure transparency of the remuneration and terms and conditions of the directors (or equivalent) of States owned companies, statutory bodies and bodies with substantial funding from the States of Jersey.

Conclusions

It is difficult to demonstrate the appropriateness of Board remuneration in the absence of a clear overarching policy.

The C&AG recommends the development of an overarching policy including a framework within which:

• the envelope for Board remuneration is established;
• individual Board member remuneration is established, taking into account relevant factors, including comparable roles and market forces; and
• the components of pay packages, including the nature and terms of bonus schemes, are determined.

There is no single part of Government with responsibility for oversight of Board remuneration and it is not obvious where such a responsibility would lie. In order to progress the development and subsequent oversight of a Board remuneration framework the C&AG concludes that it is necessary for the States to establish and empower an appropriate body or group to do so.

The C&AG also noted that:

• there is a need for enhanced transparency about the remuneration of Board members of some of the organisations reviewed; and
• the review reinforces the C&AG’s concern, reflected in previous reports, that insufficient priority has been given to overseeing the relationship with companies, statutory bodies and funded bodies.