FRC updates guidance on non-executive director remuneration to support good governance
News types: Guidance
Published: 5 November 2025
The Financial Reporting Council (FRC) has today published updated guidance on the remuneration of non-executive directors (NEDs) as part of its regular updates to the guidance supporting the UK Corporate Governance Code 2024. This guidance does not change the UK Corporate Governance Code itself but makes clear the existing principle of Comply or Explain provides companies with flexibility to structure NED remuneration.
The update provides clarity on how companies can structure NED remuneration, recognising that companies may encourage non-executive directors to build personal shareholdings to foster alignment with shareholders and reinforce long-term commitment, whilst emphasising that any approach must be tailored to the specific circumstances of each company.
The guidance makes clear that, in line with the Code, boards have flexibility to pay non-executive directors a portion of their fees in shares, provided they maintain transparency about their rationale and approach.
Where companies consider alternative remuneration structures, the guidance emphasises the importance of preserving independence, noting that performance-related remuneration remains inappropriate for independent non-executive directors.
Richard Moriarty, Chief Executive of the FRC, said:
“The UK Corporate Governance Code's comply or explain approach gives companies the flexibility to adopt governance practices that work for their specific circumstances and is a key asset for the UK in terms of its international competitiveness. We want to encourage boards to use this flexibility thoughtfully.
“This update will reinforce that companies can take varied approaches to structuring remuneration, provided they preserve director independence and are transparent with shareholders about their decisions. One size doesn’t fit all so good governance is about finding the right approach for your company.”