Discussion Paper of the Institute for Organisational Economics 9/2012

How (Not) to Pay Non-executive Directors
Alexander Dilger
September 2012



Performance pay, at least as usually understood, is no good idea for non-executive directors. They have to supervise and control or in some situations even to fire and replace the executive managers. This means that their performance as supervisors is totally different from the performance of the supervised executive managers and even the company at large. Moreover, they are mostly interested in other things than their pay. Thus, their pay should be fixed and not too high.