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Fees paid to directors began to lift during the past year, after many stopped being paid or took reduced fees last year, the Directors’ Fees 2021/2022 Report has revealed.
The report, produced by the Institute of Directors (IoD) in partnership with Ernst & Young (EY), provides key information on director remuneration in New Zealand. It brings together data for 1,768 New Zealand directorships held by 571 members of the IoD across 1,039 organisations.
“In last year’s fee survey, many directors reported devoting more time to board duties, often for reduced fees or foregoing payment altogether due to the pandemic,” said IoD General Manager, Learning and Branch Engagement, Dr Michael Fraser.
“This year, non-executive chair fees have increased by 7.9% in the past 12 months, after three years of relatively stable median increases. Non-executive director fees have also increased by 7.1% over the same period, with the median rising from $46,700 to $50,000. This lift may be due to general inflationary pressures, or a perception of the skills and experience required to manage increased complexity and risk,” he said.
He noted that while there was a median increase in non-executive chair and director remuneration, this was not spread evenly across all types of organisation or industry.
“The housing market and construction industry are among the key drivers of our economic recovery, so it is perhaps unsurprising that the largest annual median fee industry movement was in property and real estate services at 10.3%, followed by construction at 7.2%,” said Dr Fraser
“Industries showing no fee movements included accommodation and food services, administrative and support services, arts and recreation services, government administration and safety, mining, retail trade, and wholesale trade. Agriculture, forestry and fishing saw just a 0.1% increase,” he said.
“At an organisational level, NZX-listed, statutory boards and Maori entities reported stable director fees, while council-controlled organisations and not-for-profit boards saw increases of 4.8% and 4.4% respectively.
The survey also found that directors are mirroring the employee experience with more ‘virtual’ meetings and more frequent engagement.
This year, 88% of responders reported they had been able to attend board meetings or committees either virtually or in person. Only 8.2% of organisations required meetings to be attended in person.
Overall, directors reported a median drop in the number of hours spent on board matters and most reported having three directorships, compared to four in the previous year.
“It appears the impact of the ‘virtual workplace’ brought about by the COVID 19 pandemic may have allowed directors to rationalise their commitments and for boards to be more efficient in their time commitments,” said Dr Fraser.
“In 2020, boards had to adjust swiftly to largely unforeseen challenges and entirely new ways of working. Some of the changes introduced out of necessity are likely to become convention. One thing we have learnt over the last year or so is that the most successful boards – those that can confront challenge and grasp opportunity – are agile and adaptable.”
Una Diver, Partner, People Advisory Services for EY, said that, from the boardroom to the shop floor, the pandemic has radically changed perspectives around the how, when and where of work.
“The survey responses indicate that many boards have changed the way they meet,” said Ms Diver.
“More ‘virtual’ meetings and more frequent engagement are common themes, mirroring the employee experience. The impact of the ‘virtual workplace’ extends across areas of governance from culture to asset management and property footprint.
“While COVID-19 has added to the complexity of governance, it has also presented an opportunity for organisations and people leaders to adapt their approach to some of the key risk areas in the people arena, such as skills and talent, capital and cost and workforce planning.
“Across all aspects of governance, there are a watershed of changes occurring that will continue to provide intellectual challenge for directors. Whether you are new to governance or an experienced director, it’s certainly an exciting time to be serving on boards,” she said.
This is the seventh year the IoD has partnered with EY to produce its Directors’ Fees Report, providing benchmarks to help organisations to set director fees. The research also provides insights to support the IoD’s wide-ranging services to support, equip and enable directors to add value to their organisations and wider communities.
The full Directors’ Fees Report 2021/22 contains comprehensive detail and is available for purchase from EY: firstname.lastname@example.org
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