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When COVID-19 first hit New Zealand earlier this year, 40% of directors stopped being paid or took reduced fees, the Institute of Directors (IoD) and professional services firm, EY said today.
The IoD and EY 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%) had stopped paying their non-executive independent directors altogether; and 16.4% of organisations had reduced fee payments,” the IoD’s General Manager Learning and Branch Engagement, Dr Michael Fraser, said.
“All areas of governance are impacted by the unpredictable coronavirus, which has changed organisations and the way we work,” Dr Fraser said. “It has put boards under more pressure with directors working harder for longer to deal with a lot of risk and business challenges.
“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.
“The overall median annual fee for non-executive board directors or trustees participating in the survey rose by $350.00 (0.8%) to $46,700 in 2020, compared to $46,350 in 2019,” Dr Fraser said.
“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,” Dr Fraser said. “Most (90%) 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 said 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,” she said.
“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,” Una Diver said.
“The lockdown really saw the rise of the online worker, a flexi-place workforce and those organisations coping with that did not let the pandemic slow them down,” Una Diver said.
“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,” Una Diver said.
“This pandemic is a game changer because where there is risk there is also opportunity,” Dr Fraser said.
“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,” Una Diver said. “If you are a director or trustee, you might want to think about your hiring strategies a little differently.”
The full Directors’ Fees Report 2020/21 contains comprehensive detail and is available for purchase from EY: firstname.lastname@example.org
Photo: Dr Michael Fraser
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