Before the publication of its annual guide to non-executive director (NED) practice and fees in June, a partner at PricewaterhouseCoopers said: "A common question is: 'are NEDs getting paid enough for the responsibilities involved in the role'."

The fees of NEDs are increasing. The going rate is between £15,000 on an AIM company board and £54,000 for a FTSE-100 company. But with increased regulation and the threat of litigation, are the rewards worth the risk?

Non-executives at Equitable Life faced a £3.2bn claim for negligence and breach of fiduciary duty in 2005. At Hollinger International, they were pilloried for insufficient knowledge of corporate goings-on. The fact is that NEDs tread a fine line between supporting a business and jeopardising their own reputation and financial security.

It's a risk that Peter Brown, chairman of Independent Remuneration Solutions and non-executive director on two public company boards, is prepared to take—"from a business interest rather than a financial perspective."

The Higgs 2003 review of corporate governance redefined the role of NEDs, but Brown finds they are not terribly well paid: "Not least for their work on sub-committees, which, since Higgs, now takes up around 60 per cent of their time. Even six-figure fees are not enough to attract non-executive chairmen to the audit sub-committees of some FTSE-100 firms."

Giles Peel, MD at Capita Company Secretarial Services, NED at two private companies and chairman of a third, agrees. "It's what you do at the margin, your counsel to the board, that most benefits the organisation," he says. "Although the role is often vocational, companies can't moan about not getting good calibre people if they don't make it worth someone's while."

Headline-grabbing stories tell of financial loss, imprisonment and tarnished reputations. Does this make NEDs, in effect, whistleblowers?
Brown thinks not. "When a company cannot be dissuaded from acting outside the interests of shareholders, NEDs ought to resign 'noisily'. Instead, they leave quietly. The fear is that without directors and officers [D&O] protection they could end up financing a legal battle against the company's mightier resources."

At legal firm Halliwells, partner Paul Thomas cautions NEDs to check the terms of their D&O cover. "It should be ring-fenced specifically to protect NEDs in the event of litigation. Ideally, it should be their own personal cover and they should take steps to ensure it remains in place after their resignation or retirement," he says.

Peel recommends "proper due diligence on the organisation before taking on the role. Look at how it operates, how committee structures work and at the interaction between the execs and non-execs."

There are products designed to interrogate a company's processes and practices and to identify a risk that might scupper a business before it has a chance to occur. "It's a health check that gives NEDs a clear indication of what they are getting into," says Thomas.

Although the odds appear to be stacked against them, and the rewards are less tempting, business people still want to be NEDs. According to management firm Strategy Consulting, the number of NEDs is increasing, and companies tend to have a ratio of one independent director to every executive director, irrespective of turnover. The average in smaller companies (below £25m turnover) is three NEDs in a total of six directors.

"But, the 'gene pool' of NEDs won't get any bigger if the headhunter is always after proven track record," warns Peel. "It would be good to see the introduction of mechanisms that expose potential NEDs to the role-a sort of work experience-to expand that pool. More people will discover that a non-executive directorship is a hugely satisfying adjunct to the day job and is not just for retired executives and professionals."