Magazine article New Zealand Management

Pay Catch-Up: Closing the Tasman Gap

Magazine article New Zealand Management

Pay Catch-Up: Closing the Tasman Gap

Article excerpt

When it comes to remuneration, New Zealand directors seem to be playing catch-up with their Australian counterparts. That is one of the key findings of an important new survey of the state of director remuneration, governance issues and director attitudes conducted by integrated human resources consultancy Sheffield and The Director magazine. The survey provides the first comprehensive overview of the state of governance in New Zealand and makes direct comparisons with the Australian market.

Fees paid to New Zealand's non-executive directors (NFDs) increased by 20.5 percent at the median last year, compared with increases of between five and seven percent in Australia. But, Kiwi directors are still paid less than half the equivalent going rate in Australia.

But just as important as the revelations on pay differential are the insights the Sheffield survey provides into the changing times, workload and personal risk demands on directors serving on New Zealand's publicly listed, private and public sector boards.

The survey of 268 New Zealand organisations provides a comprehensive new benchmark for governance recruitment and remuneration practices. It also identifies director and board concerns at the impact increased governance regulation and compliance is having on board time and individual director liability.

"The change in work commitment is more significant than we expected," says Sherry Maier, Sheffield's remuneration practice manager and survey advocate. Almost two thirds (60 percent) of survey respondents reported increased directorship workloads in the past year. They reported more work in board committees, an increase in the number of committees, more frequent and longer committee meetings. The survey suggests directors spent about 38 days a year on a typical directorship.

"In addition to audit, remuneration and nomination committees for example, there is a long list of special purpose committees that boards set up to look at special projects," says Maier. "They include committees to deal with one-off transactions--due diligence related for instance--credit and risk committees, property committees, risk and superannuation committees. Boards are playing a more hands-on role and are more engaged [with the organisation] which requires more time and commitment from individual directors than in the past."

Risk management issues, transactions (such as acquisitions or mergers), regulatory and compliance issues are the three top ranking reasons for increased director workloads. As the executive summary of the survey points out: Although 68 percent of respondents considered regulatory requirements are reasonable, a majority--60 percent--believe regulatory compliance has become "a burden or a distraction".

And 77 percent of respondents believe the risks involved in directorships have increased over the past five years. Almost a quarter of directors reported having a "negative experience" over the time--none of which involved financial risk but obviously the perceived (and actual) reputational risk is high. "These are not good odds," says Maier.


It is possible, however, that the compliance and regulatory demands may have peaked. "Some chairs and directors have indicated that there was a lot of start-up work to develop pro-cesses and systems [following the implementation of Sarbanes-Oxley Act provisions] and now that these are set up it converts into a review process. We expect the risk management regulatory compliance time requirements to decline in the next couple of years," suggests Maier.

However, the full impact of the implementation of new International Financial Reporting Standards will kick in soon and this may be reflected in compliance time demands next year.

The survey also asked if, in meeting governance regulations and compliance standards, their company's performance had improved and fewer than 30 percent felt it had. …

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