Directors’ Fees Survey: Impact of pandemic and disparity between public/private sector fees

Findings from Strategic Pay’s annual 2021 Directors’ Fees Survey have revealed the first drop in fee levels in a decade, further highlighting the impact that the pandemic has had for New Zealand businesses and their boards.

A reflection of the tough and unusual year that was 2020, overall data (spanning both private and public sector organisations) indicates a 2.4 percent decrease in median fee levels – a result of a reduction in fees experienced by some, and a lack of movement for many others.

Strategic Pay’s recently appointed managing director, Cathy Hendry, says, in a statement, that it’s unsurprising that directors’ fees have taken a hit, given the unprecedented nature of Covid-19 – but the long-term effects of the pandemic are likely to be minimal, and that fees are expected to bounce back within the next two years.

“Of even greater interest is the ongoing disparity in remuneration levels between the public and private sector – with 2021 findings highlighting a similar gap to that uncovered last year. With fees at small private-sector organisations often equivalent to those at some of our largest Crown-owned entities, it’s a sad reflection of the value being placed on governance roles inside some of New Zealand’s largest organisations.

“Predictions are that this gap will only continue to grow over time, severely limiting the appeal of public sector board roles, and therefore the pool of talent available to serve in these positions. I’d expect this to be a significant cause of concern for policy makers,” says Hendry.

Meanwhile, 47 percent of respondents also reported an increase in workload over the last 12 months. This was initially fuelled by the need for a rapid response and adjustment to the uncertainty of the Covid-19 environment – and has been sustained by greater compliance-related issues, personal and professional risk (including new health and safety legislation), and increased scrutiny and demand for transparency.

Further inroads have also been made as part of efforts to reduce the gender gap on New Zealand boards. This year’s findings show 23 percent of chairs and 37 percent of directors are women – up from 20 percent and 35 percent respectively in 2020. This is a substantial increase from almost a decade ago, where women made up only 12.5 percent of chairs and 22.8 percent of directors. 

Across the Tasman, survey results identified a higher ratio between chairs and directors fees (2.4:1.0) than in New Zealand (2:1), a reflection of the importance the Australian market attaches to this role.

Survey results also highlighted the importance of using market capitalisation in setting fees, and the growing popularity of equity-based remuneration programmes – in line with a greater emphasis on aligning director fees to performance.

More broadly, the survey found that reward policies are under the spotlight as companies look for value for money during Covid-19.  

See: www.strategicpay.co.nz.

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