The latest survey of Director Remuneration by Moyle Consulting Ltd shows that 80% of organisations made no change to fee levels. But 20% made significant increases, with these organisations providing a median increase in base fees of 20% for both directors and chairs. This is the largest percentage movement in the five-year history of the survey, according to Moyle Consulting Director Jarrod Moyle.
Across the entire sample the median base fees have risen by 8% to 9%. The increases take the median annual base fee for non-executive directors to $32,655, up from $30,000 a year ago. For chairs, the median annual base fee is now $58,375, up from $54,000 a year ago.
The percentage moves in some cases may be high, but they are off very low dollar levels,” Mr Moyle says. “New Zealand directors continue to be under-rewarded for the responsibilities and workload they bear.”
Moyle Senior Consultant Sherry Maier, a specialist in director remuneration, says comparison with same-sized organisations in Australia shows a gap of 50% to 130% in fee levels. “We are not demanding parity, as Australia is a much larger economy with many more listed companies. But the gap does need to narrow, both as a matter of equity and if we want to upgrade the calibre of boards.”
Mrs Maier says the Director Survey highlights a flaw in remuneration practice at board level. Many organisations neither review nor adjust Board fees at all from year to year, and then after three or four years find themselves in a catch-up situation, where large percentage increases are required. “We suggest it would be much better to make small changes every year. Certainly, annual pay reviews are the norm for executives.”
In the current climate, many organisations are reluctant to raise fees at all for fear of criticism. Mrs Maier says this reflects a lack of understanding about the importance of the Board’s role in building and protecting shareholder value.
“When a company is doing well, nobody gives the Board a pat on the back. But when the going gets tough, the board often takes the heat. In tough times, the time commitment and workload escalate. And, unlike executives, directors face personal legal liability. They should be fairly compensated for the very real risks and responsibilities involved.”
Asked how their workloads have increased in the past year, 28% said Organisational Performance problems were proving more demanding of their time, compared with 21% in 2008.
“This is consistent with the troubled economic environment,” says Mr Moyle. “Directors would prefer to be spending more time on Strategic Planning and issues around Succession and CEO Development. The downturn has definitely shaped a different agenda.”
The survey analysed remuneration levels, governance issues and director attitudes in 226 organisations representing a variety of sizes, sectors, location and industries. Other key findings from the survey include:
- The Not-for-Profit sector increasingly pays modest fees or retainers to its directors, where traditionally these roles have been unpaid.
- Time per directorship has increased some 15%.
- Auckland non-executive directors receive the highest fees with median fees of $39,750, followed by Wellington at $32,028, regional North Island at $31,000, Christchurch at $30,000 and regional South Island at $22,679.