Governance insights from the Directors’ Fees Report 2025-26

The 2025 Directors’ Fees Report produced by The Institute of Directors (IoD) and EY is a key source of information on directors’ remuneration in the New Zealand market, derived from 1,158 IoD directors across 1,957 organisations representing 5,169 directorships.

 Director fees are under the microscope, but so too is the value boards deliver. In a year marked by greater scrutiny of governance performance, boards are being challenged to demonstrate accountability, impact and a clear return on investment. With confidence rising in some sectors but long-term risks still looming, the boardroom is no longer immune from the transparency demands facing the rest of the organisation.

Over the past year concerns about long director tenures, underperformance, excessive fees and poor board oversight have attracted growing media, shareholder and public attention. From activist shareholders demanding board renewal, to high-profile director exits and increasing pushback on remuneration reports, governance decisions are being more actively challenged than ever before. Boards are being judged not only by outcomes, but by the quality of their stewardship and their responsiveness to risk, performance and change.

This year’s Directors’ Fees Report provides a critical pulse check – not only on remuneration levels but on the broader expectations and context shaping board performance. Interestingly, the survey shows a reduction in the median hours worked by directors. However, this does not suggest the role has become less demanding. If anything, the intensity of expectation on directors has sharpened, but as boards have hyper-focused on financial viability, activities such as professional development have taken a back seat.

A nuanced picture is emerging. While short-term optimism is lifting, with many directors’ reporting stronger confidence than at any time in the past two years, concerns remain about long-term challenges. Structural pressures around infrastructure, labour, climate transition and productivity persist, prompting boards to maintain a steady focus on risk oversight, resilience planning and investment-readiness. Boards continue to navigate waves of uncertainty, from cybersecurity and AI to climate disruption, stakeholder scrutiny and reputational risk.

In this environment, the quality of governance matters more than ever. Stakeholders are looking for more than compliance and reporting – they expect boards to set culture, drive performance, ensure accountability and be willing to ask the hard questions. That includes questions about board renewal, independence, diversity of thought, transparency in remuneration and whether current structures are truly fit for purpose in a more volatile, contested operating environment.

Meanwhile, boards face a balancing act: navigating short-term financial pressures while staying focused on long-term value creation. The skills, time and expertise required of directors are substantial and yet remuneration increases are frequently dampened by competing expectations of fair recognition and fiscal restraint, and public or stakeholder perception.

Value for money in the boardroom isn’t just about the fees paid, it’s about the effectiveness, agility and impact of governance itself.

Mind the gap

The pay gap for female directors closed a bit more this year. The median pay for male non-executive directors increased by 10% (from $50,000 to $55,000) versus the median pay for female non-executive directors, which increased 19.3% (from $45,000 to $53,700). The gender pay gap for non-executive directors closed from 10% in 2024 to 2.4% in 2025. Nonetheless, there is still a notable gap of 11.3% between male and female executive chairs.

Despite women being over-represented in not-for-profit (NFP)organisations male directors were still more likely to be trust chairs (52.7%). However, there has been positive movement in gender representation across all roles with the exception of executive deputy chair. The biggest increases were trust chair (up 13.2% from last year to 47.3%), advisory board chair (up 11.6% to 32.3%), non-executive deputy chair (up 9% to 20%) and advisory board member (up 6.7% to 40%).

The latest public sector stocktake shows women’s representation on government-appointed boards dipped slightly from 53.9% to 52.1%, though it remains above the government’s 50% target. Māori representation improved marginally to 27.2%, and Pacific and Asian representation remained stable at around 7% and 6% respectively. Asian women notably hold a strong majority (61.6%) of all positions held by Asian directors, showing progress in targeted demographics. However, other ethnic groups, including Middle Eastern, Latin American and African, hold only 0.6% of public sector positions. These findings highlight ongoing diversity gaps and reinforce the need for intentional and sustained efforts toward inclusive governance.

Outstaying your welcome?

Director tenure has long been a point of governance debate. Some argue lengthy board service can breed complacency, reduce independence, create groupthink and limit diversity. However, findings from the 2025 Directors’ Fees Report challenge the assumption directors are staying too long. The median tenure remains just three years, suggesting outstaying may be the exception rather than the rule. The full tenure range in the survey spanned from one to 55 years, with the longest tenure recorded on an unlisted (private) company. This expansive range reveals that while some directors do serve for decades, most do not.

The proportion of respondents who reported a tenure of five years or less was 77% of directors on council-controlled organisations, followed by Māori entities at 75%, SOEs at 71% and NFP boards at 69%. While this offers flexibility, renewal and responsiveness, it can also create instability. This raises critical questions about onboarding effectiveness, continuity of institutional knowledge, strategy development and return on investment. Directors may barely settle into their responsibilities before they are due for reappointment or exit. Boards may benefit from investing in mentoring, structured induction and peer support to ensure early-stage directors can contribute effectively despite shorter terms.

New directors often require substantial time and support to get up to speed, particularly in increasingly complex operating environments. Without sufficient runway, even capable directors may struggle to contribute meaningfully. This is especially true when there is little investment in structured induction or mentoring. Training and professional development, tailored to the organisation’s risks and priorities, can help accelerate readiness and long-term value. Short terms also intersect awkwardly with governance processes such as board evaluations, strategic planning cycles and performance expectations.

Instead of worrying solely about directors staying too long, perhaps the greater governance risk lies in directors not staying long enough. High turnover can impede strategic follow-through, disrupt board dynamics and make succession planning difficult. According to the Four Pillars of Governance Best Practice, staggered terms and role rotation are important tools for succession planning but they must be balanced with ensuring boards retain experienced directors who understand the organisation’s context, risks and obligations. Well-structured succession planning should include board evaluations, a current skills matrix, and investment in mentoring or development pathways for emerging directors.

The issue of leave entitlements for directors further complicates the picture. Unlike employees, directors don’t have access to parental, bereavement or medical leave, despite often holding multiple roles and being subject to the same life events. Stepping off a board due to personal reasons often means reapplying through a full process to return, effectively penalising directors for needing time away. This reality may also contribute to premature exits or discourage applications from otherwise-qualified individuals with caregiving or health responsibilities.

Internationally, there is growing interest in director tenure policies, particularly on listed company boards. Some institutional investors and governance bodies now advocate for term limits or regular reappointments to preserve board independence and encourage refreshment. In New Zealand, shareholders and commentators have similarly begun questioning long-standing tenures on listed boards, with increasing attention paid to perceived stagnation in leadership. Despite this, the survey found directors with 11- to 20-year tenures were only a small percentage of respondents, most common among unlisted (private) companies (12%), cooperatives (12%) and listed entities (11%). However, there is no one-size-fits-all solution. Tenure should be evaluated in context, taking into account board performance, composition and succession needs, rather than rigid timelines.

In short, the tenure debate is less about length and more about value. Boards should ask: Are our directors still adding value? Do we have the right mix of experience, diversity and renewal? And are we supporting directors, particularly new and emerging ones, to succeed in the role? As the governance environment grows more demanding, boards will need to strike a balance between stability and renewal. Done well, tenure management is less about imposing limits and more about fostering a healthy, forward-looking board culture. And that means not just knowing when to step off but ensuring directors have the time and support to truly step up.

When time isn’t on your side

Board directorships are increasingly demanding, and not every opportunity is the right one. This year, 32.8% of respondents reported turning down a board appointment. The leading reason? Time.

Nearly three-quarters of respondents (73%) cited time commitment as the primary reason for declining a board appointment. This signals an important dynamic in director decision-making: capacity matters. Directors who turned down a directorship held a median of five current roles, compared to a median of three for the broader respondent group. These directors are already deeply embedded in governance and appear to be exercising discretion in line with their workload and professional judgement. They are concerned about not being able to commit the time, focus and accountability required to serve on multiple boards. While the median number of hours worked by non-executive directors declined this year (161 hours down from 178 last year), the actual reduction was due to “other governance duties” outside of meetings and meeting preparations, such as CEO coaching, health and safety site visits, professional development and conferences.

Other reasons for turning down appointments included fee adequacy (31.9%), misalignment with personal or organisational values (24.4%) and conflict of interests (10.5%). These findings reflect wider global and local conversations about director busyness and the risks of overboarding (a situation where a director holds too many board positions, potentially limiting their capacity to effectively fulfil their governance responsibilities).

The Institute of Directors has previously raised concerns about directors assuming too many commitments, particularly in an era marked by heightened scrutiny, expanding regulatory requirements and increasing stakeholder expectations. Directors must have sufficient time and capacity to fully engage, exercise effective oversight and support long-term organisational resilience, especially during periods of disruption. An overcommitted board member risks not only diminished effectiveness but also reputational harm and reduced overall board performance.

Internationally, investors and regulators are paying attention. Guidelines on overboarding are becoming more defined, particularly for directors sitting on publicly-listed or complex company boards. According to the Harvard Law School Forum on Corporate Governance, major institutional investors have incorporated formal policies within their voting guidelines limiting the number of boards a director may serve on. In New Zealand, the Shareholders’ Association has also raised concerns and recommends independent directors of NZX-listed companies hold no more than five directorships, to ensure sufficient capacity, focus and independence (noting they consider a chair to be the equivalent to two directorships).The Directors’ Fees Report data suggests some of those at highest risk of overcommitment are already self-regulating. They are prioritising quality over quantity and ensuring each role aligns with their values, interests and availability. This provides reassurance that governance culture in Aotearoa continues to evolve towards greater accountability and professionalism. Saying no to a board role is not always easy, particularly when opportunities are few or come with influence or prestige. But the findings remind us good governance starts with principled decisions by both boards and directors about what is sustainable, ethical and responsible. Capacity, alignment and purpose are central to those decisions. And when directors are empowered to decline, boards are better placed to appoint leaders who are fully equipped to govern with care and rigour.

Connections still rule the boardroom

Despite calls for more transparency and structured recruitment, board appointments in New Zealand continue to be shaped largely by personal and professional networks. According to the Directors’ Fees Report, the most common method for sourcing new board members remains referrals from current board members, cited by 57.9% of respondents. This far outpaces other approaches such as recruitment firms, advertising or using internal human resources.

The use of informal networks is predominantly in private companies (44.3%) and not-for-profits (37.9%). For other organisation types, fewer than 5% reported relying on word of mouth. While this pattern reflects New Zealand’s relatively close-knit governance ecosystem, it also raises important questions about access, diversity and succession planning.

These findings mirror insights from the 2024 Masters research project I undertook that explored how directors secured their first governance roles. Nearly half (49%) of respondents reported being shoulder-tapped or directly asked to join a board – by far the most common entry point. Other pathways included applying for an advertised role (16%), being elected (13%), or appointed due to a current position (12%) such as being the CEO of a shareholder organisation.

While these informal channels may offer efficiency and assurance for incumbent boards, they also pose the risk of entrenching homogeneity or missing out on emerging talent. The Masters survey respondents identified lack of access to networks, mentoring and early experience as key barriers to finding board roles. In the Directors’ Fees Report, of 249 respondents who stated their boards welcomed other attendees, 98 directors said their boards had future/emerging directors and 60 noted their boards had observers.

This aligns with broader insights from governance reviews across the public and private sectors. The Reserve Bank of New Zealand/Financial Markets Authority cross-sector governance thematic review and the New Zealand Rugby governance review both identified board capability, succession planning and fit-for-purpose structures as critical levers for improving governance. Importantly, both reports also highlighted the need for ongoing director training and development, reinforcing that there is no singular pathway, and capability must be actively nurtured.

Likewise, the AGMARDT review of governance in the food and fibre sector noted that while the not-for-profit sector is often viewed as a stepping stone, it may not always adequately prepare directors for the commercial or regulatory rigour of more complex entities. In the Directors’ Fees Report, the most cited motivations for joining a not-for-profit board were to give back to the community (70.9%) and interest in the organisation or cause (69.2%). Only 44.5% selected governance experience as a driver, indicating not-for-profit service is typically values-led rather than strategically oriented toward professional board pathways.

Together, this data paints a clear picture: while the governance ecosystem offers valuable informal pathways, more structured, transparent and capability-building approaches are needed. While connections may open doors, it is training and professional development that provide the confidence, language and capability to contribute meaningfully at the board table. Strengthening recruitment practices, improving access to development opportunities and investing in emerging director pipelines will be essential to ensuring boards are future-fit, diverse and equipped for today’s increasingly complex operating environment.

Satisfaction up for review

Fee adequacy remains a pressing concern. While fixed fees remain the predominant payment structure for directors, the proportion of directors serving in unpaid roles has risen slightly, highlighting ongoing remuneration challenges within certain sectors and governance contexts.

The median fee movement for non-executive directors saw an increase of 7.4%, from $50,000 to $53,700. Yet despite this uplift, overall satisfaction with remuneration has decreased. More than half of directors (58.1%) expressed satisfaction with their fees, a decline of 6.9% from the previous year. This decline signals persistent issues around remuneration alignment with increasing workloads, risk profiles and governance expectations.

While directors on listed entities continue to report comparatively high satisfaction levels (65.4%), there is substantial variation across organisation types. Particularly striking is the continued dissatisfaction among Crown entity directors. Although satisfaction in Crown entities has risen from zero the previous year to 23.9% this year, it remains the lowest among all organisation types.

In November 2024 the government announced a two-stage process to address historical underpayment for State Owned Enterprises – beginning with immediate increases and followed by a second phase intended to further align remuneration with private sector benchmarks. More recently, in July 2025 the Government revised the Cabinet Fees Framework, increasing the fee bands for directors of Crown entities and related boards. The change allows Ministers to reassess and recommend higher remuneration where board responsibilities have increased – aiming to ensure fairer remuneration and help attract and retain quality directors. These adjustments acknowledge the need to better recognise the time, risk and complexity involved in Crown governance roles.

Directors’ concerns over fee adequacy extend beyond mere dissatisfaction with remuneration levels. Among directors reporting fee inadequacy, the overwhelming concerns were the substantial time commitment required (85%) and the significant increase in workload (55.4%). Moreover, personal or reputational risk (50.7%) and the growing compliance burden (27.8%) further compound directors’ concerns, emphasising the evolving and increasingly complex responsibilities expected from governance roles.

Fee-setting practices continue to vary, with most boards reviewing fees annually. Benchmarking remains the predominant method (57.8%), reflecting directors’ preference for market alignment and competitive remuneration structures. Nonetheless, the continued decline in satisfaction suggests benchmarking alone may not adequately capture the expanding role and heightened expectations on directors.

Gender disparities remain a notable issue within remuneration frameworks. Although efforts continue to close the gender gap, the persistence of lower fees for roles predominantly held by women underscores a broader systemic challenge. With median fees for female directors lower than their male counterparts, ongoing transparency, benchmarking and targeted strategies are critical to addressing this imbalance. The pay gap is also reflected in satisfaction levels, with only 52.3% of female directors satisfied with their remuneration versus 61.8% of male directors.

Ultimately, director fee adequacy remains an area requiring thoughtful consideration and policy action. As governance expectations intensify and director workloads expand, fee structures must evolve accordingly, ensuring boards attract and retain experienced and skilled individuals capable of steering organisations through complex and challenging landscapes. Boards must commit to transparent, fair and consistently reviewed remuneration policies that reflect the critical role directors play in organisational success and sustainability, and close the gender pay gap.