How Fair Compensation Can Strengthen the Role of Independent Directors
Excellence Enablers examines how fair compensation, meaningful board evaluation and performance-based rewards can help Independent Directors contribute more effectively to corporate governance.
New Delhi, India – March 2026: Excellence Enablers has highlighted the need for a more balanced approach to the compensation of Directors, particularly Independent Directors, in its March 2026 newsletter, Edition #119.
The article, titled “How Little Is Too Little?”, examines an important question in corporate governance: how can companies attract capable and committed Independent Directors while maintaining their independence and objectivity?
Independent Directors play an important role in Board discussions, oversight and decision-making. However, they also face increasing responsibilities, legal obligations and regulatory expectations. The article points out that inadequate compensation may discourage capable professionals from accepting Board positions, while excessive compensation may create concerns about independence.
The article discusses the different forms of compensation available to Directors, including sitting fees and profit-based commissions. It also highlights that sitting fees alone do not necessarily reflect the actual contribution made by a Director during Board and committee discussions.
A key focus is the importance of Board evaluation. According to the article, a genuine and robust evaluation process can help companies identify Directors who actively contribute to Board discussions and distinguish meaningful performance from a simple attendance-based approach.
The article suggests that external experts could periodically conduct Board evaluations to make the process more objective and effective. A stronger evaluation process can also provide a reasonable basis for recognising and rewarding Director performance.
The discussion also covers compensation for Executive Directors, including the importance of linking variable pay with clearly defined performance goals. It highlights the need to consider mechanisms such as clawback where compensation is not supported by performance.
Excellence Enablers believes that the discussion around Director compensation should focus not simply on how much Directors are paid, but on whether compensation is fair, performance-oriented and consistent with the responsibilities attached to Board positions.
The article concludes that adequate compensation for performing Directors can contribute to more productive Boardroom conversations and ultimately support the interests of companies and their stakeholders.
The article, titled “How Little Is Too Little?”, examines an important question in corporate governance: how can companies attract capable and committed Independent Directors while maintaining their independence and objectivity?
Independent Directors play an important role in Board discussions, oversight and decision-making. However, they also face increasing responsibilities, legal obligations and regulatory expectations. The article points out that inadequate compensation may discourage capable professionals from accepting Board positions, while excessive compensation may create concerns about independence.
The article discusses the different forms of compensation available to Directors, including sitting fees and profit-based commissions. It also highlights that sitting fees alone do not necessarily reflect the actual contribution made by a Director during Board and committee discussions.
A key focus is the importance of Board evaluation. According to the article, a genuine and robust evaluation process can help companies identify Directors who actively contribute to Board discussions and distinguish meaningful performance from a simple attendance-based approach.
The article suggests that external experts could periodically conduct Board evaluations to make the process more objective and effective. A stronger evaluation process can also provide a reasonable basis for recognising and rewarding Director performance.
The discussion also covers compensation for Executive Directors, including the importance of linking variable pay with clearly defined performance goals. It highlights the need to consider mechanisms such as clawback where compensation is not supported by performance.
Excellence Enablers believes that the discussion around Director compensation should focus not simply on how much Directors are paid, but on whether compensation is fair, performance-oriented and consistent with the responsibilities attached to Board positions.
The article concludes that adequate compensation for performing Directors can contribute to more productive Boardroom conversations and ultimately support the interests of companies and their stakeholders.
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- Last Updated
- September 15, 2026