EDITOR’S LETTER The State of Pay

Whatever your personal opinion, the reality of modern day life is that money is at the heart of most things. And when it comes to personal remuneration, leaders in the organisational world have, in recent years, been able to command an increasingly large slice of the compensation cake. The laws of supply and demand have pushed the size of the salary envelope for senior executives and directors as organisations struggle to attract leadership talent, particularly to the top of the larger enterprise. The Director is specifically interested in New Zealand board member remuneration and in recording how well it matches corresponding increase in director responsibilities and performance expectations. That is why the magazine has joined with governance recruitment specialists Sheffield to establish new, comprehensive and comparative survey of the current state of director remuneration and governance attitudes and practices in New Zealand.
Our cover story explains the state of the governance environment as backdrop against which the results of this survey can be measured and evaluated when they are released in another few months. Director fees are climbing, particularly among New Zealand’s larger businesses. But, according to staff writer Toni Myers, they still lag well behind fees paid to directors in other countries, including Australia which is, it seems, becoming something of benchmark for boards wanting to attract good people to the table. Myers’ story explains the pressures, influences and work environment which Sheffield researchers plan to capture in sufficient detail for boards to use with confidence when evaluating what they must pay for director pedigree and performance. Directors, and chairmen in particular, should understand the dynamics of governance here and in Australia which, for number of increasingly obvious reasons, is critical to the New Zealand executive and director recruitment market.
The survey is designed to help directors monitor and interpret governance trends in Australasia. Australian companies are, for example, “more wedded to performance pay for directors” than is New Zealand. What does that mean? How will it, for example, impact director remuneration strategies here? Director fees in New Zealand have been historically low and the pool of available talent relatively restricted. But director responsibilities have increased, impacted by new legislation both home grown and imported. It is becoming accepted wisdom that organisational performance is significantly linked to board performance. Directing is “real job” that produces “real results”. It can’t any longer be seen as “hobby” or “avocation”. That switch in thinking will change the rules of the game more even than they are changing now.
This issue of The Director also takes look at the sometimes tricky-to-resolve issues around director and executive tension. Solving the CEO Agenda Problem on page 4 provides some real life insights into the conflicts of interest that can exist between board and its chief executive, while Building Partnership between CEO and Board provides guidelines to cementing strong working relationship.