Tougher rules result in directors seeking more dosh

John McGill, managing director of Strategic Pay, says that in the June year, the median remuneration for non-executive chair was $62,606 and for non-executive director it was $35,000. He says given the increased responsibilities and accountabilities directors face it is not surprising these are being reflected in their remuneration.

“But it’s definitely not one-way street, as two thirds of the 270 government and non-government organisations we surveyed indicated they would be freezing fees for the coming 12 months. Clearly many organisations are not in position to be providing their directors with the fee increases they may feel they deserve.” For those organisations not freezing directors’ remuneration, the average increase to be applied at the next review of fees is 4.6%, with the median at 3.5%.

McGill says that governance issues around the nation’s boardroom tables are rightly at the forefront of current business issues, with high-profile accountability cases before the courts and shareholders generally more vocal in their criticisms of business performance. “In this environment directors are understandably looking closely at the risks they face in addition to more demanding business climate.”

He says the survey, which has been running for the past 21 years, covers both public and private sector organisations. Until recently it was run in association with the New Zealand Institute of Directors, but it has now been significantly expanded to cover wider range of organisations.

McGill says the issue of directors’ fees was recently highlighted when Gerry Brownlee, the Minister in charge of the Christchurch Earthquake Recovery Authority (CERA), went above the State Services Commission guidelines to recruit directors for the authority. “While I imagine the Minister would have preferred to work within the guidelines, the fact that they are reviewed relatively irregularly, and have long been seen to set fee levels with strong public service discount built into them, can cause difficulties in attracting and retaining the best people.

“It can easily be argued that while CERA is critical organisation with serious governance responsibilities, there are many other organisations where the same argument is equally valid – our largest district health board and educational institutions for example. Perhaps the SSC guidelines are in need of urgent revision.”

The figures show that to earn their fees directors attended an average of nine meetings year. For 29 percent of those surveyed the meetings went on for five or more hours (excluding the background work that comes with the job).

The survey, based on data covering 1233 individual directorships, also found that in the latest year females held 10.4 percent of chair roles and 16.8% of the directors’ roles surveyed. These compared with the previous year’s figures of 10.1 percent for chairs and 18.4 percent for directors, but were an improvement on the significantly lower 2007 figures of 6.5 percent for chairs and 12.7 percent for directors.

www.strategicpay.co.nz

 

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