Research has revealed a growing pay gap among non-executives at global financial services firms, with those over the age of 70 increasingly earning more than their younger colleagues.

Ernst & Young, a professional services firm, says the survey results show growing value placed on “years of experience over other attributes”.

EY says the gap between the two age groups has grown from 14% to 18% since 2020. Even when board and committee chairs are excluded from the figures, non-executives under the age of 70 still earn 15% less than older counterparts.

There are other observations. Non-execs under 50 earned on average 42% less than their over-70s colleagues.

But pay growth rates for this young group differ around the world, says EY.

Non-executives aged 40-49 in Europe have seen pay fall, while those in North America have seen their earnings rise.

Omar Ali, EY’s global financial services leader, says: “The pattern of slower pay growth for younger board members suggests financial services firms around the world are attaching a premium to length of experience and related status—qualities that correlate strongly with age.

‘Entrepreneurial dynamism’

“The secret of the UK market’s entrepreneurial dynamism is much discussed, and our research suggests it may lie in the willingness of American and Canadian companies to champion younger talent, and to pay higher rate to secure it.”

Recent months have seen non-executive pay enter the public discourse about business and its future. In December, research by Alvarez & Marsal (A&M), a consultancy, showed median pay of non-execs in the FTSE 100 had fallen behind CPI inflation by almost 12% over the past decade.

A&M’s report followed moves by watchdogs at the Financial Reporting Council (FRC) to clarify that UK non-execs are permitted to take part of their pay in shares.

Richard Moriarty, chief executive of the FRC, said the FRC clarification would “reinforce that companies can take varied approaches to structuring remuneration, provided they preserve director independence and are transparent with shareholders about their decisions.”

However, A&M’s report insisted the issue with non-exec pay was overall “quantum” and shares were unlikely to resolve the issue.

“Aligning the UK market more closely with the US by paying a greater proportion of the NED fee in shares will not improve competitiveness, unless the level of the fee itself is also addressed,” the report said.

The executive pay debate

Pay for business leaders remains highly controversial in the UK. A campaign has been under way among senior City figures since 2023 to justify higher pay rates for CEOs of the largest companies.

Julia Hoggett, chief executive of the London Stock Exchange, recently hailed efforts by remco chairs to lift pay levels.

However, research shows that investors across Europe are not happy: there has been a 38% increase in the number of shareholder revolts (votes of 10% or more) against pay policies.

Cas Sydorowitz, chief executive of Georgeson, the advisory firm behind the pay revolt research, said investors appears to be more willing to “challenge executive pay through a more confrontational and disruptive approach”.

There now appears to be a significant focus on non-executive pay. It may not prove as controversial as CEO pay, but it still raises questions about corporate competitiveness and the skills and knowledge needed in boardrooms to support success. In an age of uncertainty, it may be the governance question of our times.