NonExecutive Directors Business Expenses Q12021(22)

1. Introduction

NonExecutive Directors (NEDs) play a strategic oversight role in public and private companies. While they do not engage in daytoday management, they attend board meetings, committees and occasional engagements that generate legitimate business expenses. This page summarises the typical expense categories, the regulatory framework that governs them, and the specific trends observed in the first quarter of 2021, focusing on the reporting year 2022 (Q1202122).

2. Regulatory background

The UK Corporate Governance Code, the Companies Act2006 and the Financial Reporting Councils FRC Guidance on Remuneration and Expenses of Directors set out the principles for transparency and reasonableness. Key points include:

• All expenses must be incurred wholly, exclusively and necessarily in the performance of duties.
• Boards must publish a clear expenses policy and disclose aggregate amounts in the annual report.
• Shareholders have a right to question excessive or noncompliant claims.

In 2021, the pandemic prompted temporary adjustments the acceptance of virtualmeeting costs and a relaxation of travelrelated expense thresholds.

3. Typical expense categories

3.1 Travel and accommodation

Even with a shift to remote meetings, NEDs still travel for annual general meetings, major shareholder events and site visits. The main items are air fare, rail tickets, mileage reimbursement (capped at HMRCs approved rates), hotel stays, and perdiem allowances.

3.2 Meeting costs

Costs related to board and committee meetings include venue hire (when not held in company premises), catering, IT equipment rental, and specialist facilitation fees.

3.3 Professional development

NEDs may claim for attendance at industry conferences, training courses, and subscriptions to professional bodies that enhance their ability to discharge fiduciary duties.

3.4 Communication and technology

In Q12021, a notable increase appeared in expenses for mobile data, secure videoconferencing licences, and personal device upgrades required for remote board work.

4. Q1202122 expense snapshot

The table below aggregates reported expenses from a sample of FTSE100 companies for the first quarter of 2021 (the reporting period for the 2022 financial statements). Figures are presented in GBP () and rounded to the nearest thousand.

Key observations:

• Travel & accommodation remains the dominant cost, representing 5565% of total NED expenses.
• Technologyrelated items rose by roughly 20% compared with Q12020, reflecting the remoteworking shift.
• Companies with larger boards (12 NEDs) tend to have higher aggregate expenses but lower average spend per director.

5. Reasonableness test what is acceptable?

A reasonableness test compares claimed expenses with the following benchmarks:

• Average industry travel cost per meeting (10,000 per director per annum).
• Standard perdiem rates (5570 per day, as per HMRC guidelines).
• Technology costs capped at 2,500 per director for equipment upgrades.

Using the sample data, the average travel expense per director in Q12021 was 9,000, well within the benchmark. However, Company Ds technology spend (4,300) exceeds the perdirector cap, suggesting a need for policy review.

6. Bestpractice recommendations

1. Maintain a published expense policy. The policy should list eligible items, caps, and approval workflows.
2. Adopt a digital expense platform. Automation reduces errors and provides realtime audit trails.
3. Review remotework allowances annually. As virtual meetings become permanent, recalibrate technology budgets.
4. Benchmark against peers. Quarterly comparisons help identify outliers early.
5. Engage shareholders. Transparent disclosure in the annual report builds confidence and mitigates reputational risk.

7. Conclusion

The Q1202122 period highlighted the continuing importance of clear governance around NED expenses. While travel and accommodation remain the largest cost drivers, the pandemic accelerated the growth of technologyrelated claims. By applying a robust policy, regular benchmarking, and transparent reporting, companies can ensure that NED expenses are reasonable, compliant and aligned with shareholder expectations.