The median fee among 1768 directorships surveyed rose from $46,700 to $50,000. Photo / 123RF
Company director fees have started rising again after a flat period of median increases, with directors in the housing and construction sector leading the way, a new survey shows.
A report by the Institute of Directors (IoD) in partnership with Ernst & Young (EY) said non-executive chair fees rose by 7.9 per cent in the past year, while non-executive fees lifted by 7.1 per cent. This followed three years of relatively stable median increases, said IoD.
The median fee among 1768 directorships surveyed rose from $46,700 to $50,000.
IoD's Dr Michael Fraser said the lift may be due to general inflationary pressures or a perception of the skills and experience required to manage increased complexity and risk.
The directorships were held by 571 IoD members across 1039 organisations.
Fraser said last year's fee survey showed many directors devoting more time to board duties, often for reduced or no fees due to the pandemic.
While there was a median increase in the fees of non-executive roles, this was not spread evenly across all types of organisation or industry.
"The housing market and construction industry are among the key drivers of our economic recovery, so it is perhaps unsurprising that the largest annual median fee industry movement was in property and real estate services at 10.3 per cent, followed by construction at 7.2 per cent," said Fraser.
"Industries showing no fee movements included accommodation and food services, administrative and support services, arts and recreation services, government administration and safety, mining, retail trade, and wholesale trade. Agriculture, forestry and fishing saw just a 0.1 per cent increase.
"At an organisational level, NZX-listed, statutory boards and Maori entities reported stable director fees, while council-controlled organisations and not-for-profit boards saw increases of 4.8 per cent and 4.4 per cent respectively."
The survey also found directors had more "virtual" meetings and more frequent engagement.
This year, 88 per cent of responders reported they had been able to attend board meetings or committees either virtually or in person. Only 8.2 per cent of organisations required meetings to be attended in person.
Overall, directors reported a median drop in the number of hours spent on board matters and most reported having three directorships, compared to four in the previous year.
"It appears the impact of the 'virtual workplace' brought about by the Covid-19 pandemic may have allowed directors to rationalise their commitments and for boards to be more efficient in their time commitments," Fraser said.
"In 2020, boards had to adjust swiftly to largely unforeseen challenges and entirely new ways of working. Some of the changes introduced out of necessity are likely to become convention. One thing we have learned over the last year or so is that the most successful boards – those that can confront challenge and grasp opportunity – are agile and adaptable."
EY's Una Diver said from the boardroom to the shop floor, the pandemic had radically changed perspectives around the how, when and where of work.
"The survey responses indicate that many boards have changed the way they meet," she said.
"More 'virtual' meetings and more frequent engagement are common themes, mirroring the employee experience. The impact of the 'virtual workplace' extends across areas of governance from culture to asset management and property footprint.
"While Covid-19 has added to the complexity of governance, it has also presented an opportunity for organisations and people leaders to adapt their approach to some of the key risk areas in the people arena, such as skills and talent, capital and cost and workforce planning.
"Across all aspects of governance, there are a watershed of changes occurring that will continue to provide intellectual challenge for directors."
It is the seventh time IoD has partnered with EY to produce its the directors' fees report, providing benchmarks to help organisations to set director fees.