Setting the Chief Executive’s remuneration package is an important role for a trustee board. Sir Stuart Etherington the Chief Executive of NCVO and himself a seasoned trustee says, ‘The public are right to ask that their donations are spent effectively and efficiently. Setting senior staff salaries is a complex task for trustees, who have to balance many factors to determine the right pay level in their organisation’.
A practical step to start is to set up a remuneration committee (if you don’t have one already). Members must be capable, impartial, responsible and committed to the good of the information. While the board should include some members of the board, it may be a good idea to include non-board members whose input would be invaluable to the setting of pay levels.
A Checklist for boards:
Create a role description for the CEO position or review and revise the existing role description
Agree terms of reference for the remuneration committee and ensure there is clarity in how the link to the trustee board.
Consider the person specifications and role descriptions for members you want to include on the remuneration committee. What relevant experience or perspective do you want to attract?
Scope the fact finding remit of the committee. ACEVO publishes an annual salary survey as do executive search firms. Monitor the remunerating setting process and link your findings to a workable schedule in the cycle of meetings for the remuneration committee.
Make recommendations to the board. Be sure that trustees understand the rationale behind the remuneration package and the total cost to the organisation.
Link the package to key performance indicators and discuss the recommended package in light of the overall organisational budget, mission and strategy.
The process should be open and transparent. The trustee board should vote on the package and the minutes should reflect the decision.
NCVO and the Charity Commission are working together to produce new guidance for trustees on how they go about setting senior executive pay. This guidance will be published early in 2014.