Changes to corporate governance rules have triggered a 38% rise in the fees paid to non-executive directors, according to pay consultancy Watson Wyatt.

In its 2004 executive reward survey of 84 organisations, the firm found that just over a quarter of participants (26%) had reviewed their NED fees in the past year and increased them by an average of 38%.

“This may be the start of a trend of significant pay increases for non-execs,” said John Ball, Watson Wyatt head of executive reward consulting. “Not only is the workload of non-executive directors growing considerably but there is increasing personal risk from regulation and litigation, and perhaps most importantly, a growing risk to personal reputation.”

The average fee for a FTSE 100 non-executive chairman is now £198,500. For that amount they typically work 100 days per year. Other FTSE 100 non-executives earn an average of £36,500, for which they typically work 18 days a year. Non-exec directors who had their fees reviewed in the past year averaged £40,000.

The primary factor driving non-executive pay rises lies in the 2003 Higgs Report, which increased the responsibilities of non-exec directors. The reforms were subsequently added to the Stock Exchange Listing Rules.

“While few non-executives undertake their roles purely for the money, we are likely to see upward pressure on fees better to reflect the increased pressures, responsibilities and required commitment,” Ball said. “Whilst only 26% of companies in our survey increased NED fees over the last year, it is likely that many of the others will feel the need to catch up over the following year, especially for key roles such as the chairmen of the audit and remuneration committees.”