More responsibility but modest pay growth

More responsibility but modest pay growth for Board Members in New Zealand reveals new survey

Remuneration specialist Strategic Pay have conducted their 24th annual study on the financial costs of corporate governance in New Zealand, noting small movements overall this year. The survey was completed in February 2016 and includes responses from 2,226 board members from 356 organisations across the country.

Pay for Non-Executive Chairs now averages $71,700 and for Non-Executive Directors $36,200, a rise from a median pay rate of $70,000 and $35,670 in 2015 and $62,606 and $35,000 in 2001 respectively. This represents a 14 per cent increase for chairs in the last 5 years. The highest fees were paid to boards of companies within primary industries and the lowest to not-for-profit organisations.

Governance fees have increased modestly at an average rate of 2.1 per cent per annum over the past three years. 43 per cent of respondents said they have adjusted their fees in the last year.

John McGill, CEO of Strategic Pay explained why board member fees come under scrutiny so often.

“The level of fees is often large compared to that of average wage figures, and the ‘largeness’ appears bigger when the part-time nature of many directorships is understood.”

The survey found that the average expected hours for Chairs is 280 hours over the year (316 reported in 2015) and Directors 191 (212 reported in 2015).

The Board of Director’s primary role is to oversee executive management and ensure the organisation is acting in the best interest of its shareholders. Even so, its responsibility to organisational success is often not fully understood. The reasons why fees are at the level they are include more comprehensive governance systems and greater use of sub-committees and more formal management of the CEO.

Furthermore, changes in legislation have increased board member’s responsibility not just to shareholders but to all stakeholders. The highly public role and major reputational risks associated with board membership has translated into higher remuneration rates and a scarcity of appropriate candidates, explained Mr McGill.

“It is not surprising the cadre of talented, qualified and available individuals is relatively small.”

Other major findings from the study include a growth in women’s representation on boards in both Chair and Director positions, and significantly higher increases in board member fees across the Tasman. The full New Zealand Director’s Fees Remuneration Report is available for $1,200 from Strategic Pay and $600 for survey participants.

Strategic Pay is New Zealand’s largest specialist remuneration and performance management consultancy working throughout New Zealand and the South Pacific. Strategic Pay’s remuneration database of over 150,000 employees is the most extensive available in this country.

ENDS

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