Accounting terms

Dictionary of all accounting terms

What is Directors' Remuneration?

Directors' remuneration is the process by which directors of a company are compensated, either through fees, salary, or the use of the company's property, with approval from the shareholders and board of directors.

The process of directors' remuneration came about because of shareholder concerns that directors were rewarding themselves large salaries despite showing poor profits or revenue.

Director fees and remuneration

Therefore, the process was initiated by which shareholders were able to agree to or reject fees paid to directors in general. This amount is the upper limit that can be paid to the board of directors.

The board of directors, in turn, will determine how those fee payments are split up among the directors, including the general director of the company.

On the other hand, director's remuneration, meaning the salaries and bonuses paid out to directors, is part of the directors' employment contract signed with the company. The board of directors then has direct control over that remuneration agreement.

Shareholders may sue the directors if they pay excessive amounts that exceed the agreed payment or if they pay themselves a disproportionately large amount of profits instead of distributing it to the stockholders as dividends.

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