When COVID-19 first hit New Zealand earlier this year, 40 percent of directors stopped being paid or took reduced fees, according to the Institute of Directors (IoD) and professional services firm, EY.
The two organisations surveyed 674 directors holding 1830 directorships during May this year, at the height of the first pandemic wave.
“Almost a quarter of the organisations surveyed (23.5 percent) had stopped paying their non-executive independent directors altogether; and 16.4 percent of organisations had reduced fee payments,” the IoD’s general manager learning and branch engagement, Dr Michael Fraser, says in a media release.
Key findings of the survey included:
• 57 percent of directors spend more time on board duties.
• 29 percent of directors surveyed were women.
• 82 percent of boards meet six to 15 times a year.
• Most directors had four directorships.
• 59.7 percent of directors were satisfied with their remuneration levels.
“All areas of governance are impacted by the unpredictable coronavirus, which has changed organisations and the way we work. It has put boards under more pressure with directors working harder for longer to deal with a lot of risk and business challenges,” Fraser says.
“This virus is the biggest test many boards have faced and directors will be closely watching their organisation’s cash position and solvency. Directors have to exercise courage in decision-making while putting health and wellbeing first.”
He says that the overall median annual fee for non-executive board directors or trustees participating in the survey rose by $350.00 (0.8 percent) to $46,700 in 2020, compared to $46,350 in 2019.
“Meanwhile, non-executive directors were meeting more often and spending more time on their duties, working an average 176 hours this year compared to 169 hours in 2019.
“Directors’ fees are low in New Zealand when you consider the skill and experience they bring to the table and the regulatory risk they face. Many directors do it for passion or purpose,” Fraser says.
“Most (90 percent) of the 1202 organisations we sampled this year were Kiwi-owned with shareholder funds of less than $5 million.”
EY partner people advisory services, Una Diver, says directors’ commitments were increasing but the fees for services had stayed about the same. “While workloads have increased, corresponding fee levels have not followed the same trend.
“The role of governance during this pandemic is enormous. Governance doesn’t stop. Directors have to be thinking about rebalancing their capital and costs; and looking after their workforce. Some organisations have had to let staff go, while other staff were redeployed or furloughed. Some of the jobs lost will never come back as they were, as organisations and consumers have changed the way they interact,” she says.
She also points to the lockdown seeing the rise of the online worker, a flexi-place workforce and, those organisations coping with that, did not let the pandemic slow them down.
“Not all sectors, industries or organisations surveyed have felt the impact equally – trends vary across the 18 sectors and types of entity. But it’s clear boards of Kiwi organisations decided to do more for less in order to help as many of those organisations as possible recover, as quickly as possible.”
Fraser adds that the pandemic is a game changer because where there is risk there is also opportunity.”
“Boards of trustees and directors need to set a clear and careful path through this time, looking after employees, shareholders and all other stakeholders, communicating, working with management, and balancing short- and longer-term foresight.”
“With immigrants no longer filling skills gaps in healthcare, construction and farming, directors and management really will have to put on their thinking caps and be creative in sourcing talent,” according to Diver said.
“If you are a director or trustee, you might want to think about your hiring strategies a little differently.”
