Directors’ fees – gender pay gap closing

The gender pay disparity between male and female non-executive directors has dropped by more than half over the last three years, according to the Institute of Directors’ 2017 Directors’ Fees Report out today.

In 2015 the pay difference between male and female non-executive directors was 21.6%, in 2017 the gap was just 9.9%.

Institute of Directors Chief Executive Kirsten Patterson says: “The challenges of disruption and the modern world, call for modern and diverse boardrooms. So it’s pleasing to see that the gap between male and female non-executive director fees continue to close.”

Non-executive director fess had a moderate increase to $44,000 up 2.3% from $42,994 in the 2016 year. For non-executive chairs the median fees also increased less than in 2016. The median non-executive chair fee increased from $54,000 to $55,000 (c.1.9% compared to 2.9% in 2016).

“Although small rises in New Zealand, on an international comparison our fees remain low,” Patterson says.

“Key skills required of directors are emerging now that were not there five years ago, with cyber skills being one of them – increasing the scope of risk oversight.

“There is also more expectation, especially from institutional investors, that boards must play an increasingly meaningful and prominent role in shareholder engagement that extends beyond general meetings. And although boards must now be more transparent around fees, it is just as critical that fees remain competitive to attract good directors, to deliver on these shareholder expectations.”

The 2016 IoD Director Sentiment Survey showed an overwhelming majority of boards (86%) said stakeholder interests were very important to their business, including almost all (97%) of publicly listed companies.

“The importance of stakeholder interests is a key global theme in corporate governance as businesses increasingly focus on long-term sustainability, including the impact this has on society and the environment,” EY partner Una Diver says.

“The risk and compliance landscape for directors is likely to change significantly in the next 12 months as boards get to grips with the NZX’s new corporate governance code.

“The code, which mandates higher standards of transparency and disclosure in areas such as director and CEO remuneration, auditing and health and safety monitoring, will inevitably increase directors’ workload.

“Boards will now be considering their remuneration levels, and whether these are fair and realistic, given the higher levels of compliance and increased exposure to risk directors are facing. The new code is a significant change in terms of transparency for fees reporting and executive remuneration.”

But Diver warns directors seeking to negotiate higher fees need to do their homework carefully and prepare a solid case before taking the issue to shareholders for approval.

This is the third year the IoD has worked with EY to undertake the annual IoD Directors’ Fee Survey, and this year saw a boost in survey participation, making it the most comprehensive in our history.

There was more than double the participation rates from non-executive directors on Maori and iwi boards, while input from non-executive directors identifying as from other ethnicities is up 82%. Survey data showed 58.3% were satisfied with their current level of remuneration, Patterson says: “New Zealand needs directors who are courageous but for whom the risk and reward balance in remuneration makes sense.”

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