Magazine article New Zealand Management

New Zealand-Australia Director Pay Gap Narrows

Magazine article New Zealand Management

New Zealand-Australia Director Pay Gap Narrows

Article excerpt

HAS it ever been less fun to be a corporate director? According to Sheffield's 2008 Director Remuneration Survey, in partnership with Business New Zealand, directors at 290 New Zealand organisations report that the workloads are heavier and the risks higher than ever before. There is broad consensus that boards are working more and enjoying it less.

And is that a surprise, really? New Zealand businesses are struggling with a high currency, high taxes, high interest rates, a heavy regulatory and compliance burden, tight or non-existent credit and now the uncertainty inherent in an approaching election. Besides the occasional collapse such as a Feltex, in the past years over 40 finance companies have entered some form of reorganisation, restructure or freeze. Companies such as Fisher & Paykel, Sealord and Silver Fern Farms (PPCS) have suffered public outcry over manufacturing plant closings. Other boards, such as Blue Chip, Auckland Airport or Mercury Energy, have been publicly criticised at every turn for decisions made or unmade.

All of these businesses have a board of directors that has presided, in some fashion, over the events that have transpired--or conspired--to stress so many Kiwi companies. There must be literally hundreds of directors who wished they were somewhere else--doing something else--in the past year. Surely, only a brave few would have signed on, for the fees on offer, had they known what lay ahead.

Sheffield actively tracks two direct effects of this toxic environment. First, it precisely calculates the annual rate of base fee increases across the market. The 2008 Director Remuneration Survey, released this month, reports median, year-on-year fee increases of 14.3 percent for chairs and 17 percent for non-executive directors. These double digit levels compare to the five percent base salary increase for chief executives. These boosts come on top of an identical chair increase and a 15.6 percent fee increase for non-executive directors in 2007, and do not include fee increases still to be announced in the 30 June 2008 annual reports, which are just now being published. Finally, almost half the companies in our database of 290 New Zealand organisations reported raising base fees. Gone are the days when board fees were reviewed-well, maybe--every three years.

Meanwhile, fee increases have slowed in Australia, to 4.7 percent for chairs and 7.4 percent for non-executive directors, according to Riskmetrics. This deceleration comes after 13 percent per annum increases from 2001 to 2006, and surely reflects the new ASX listing requirement that board fee increases require shareholder approval. …

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