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Home / Business / Economy / Employment

Pay for board chairs jumps 15.3pc in year

NZ Herald
3 Oct, 2012 04:30 PM4 mins to read

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Shareholders' Association chairman says fee increase of this size should be 'one-off'

Fees for board chairs have jumped in the past year as workloads increase and finance company prosecutions show the importance of directors "getting it right".

An Institute of Directors survey of almost 1000 New Zealand organisations found the median fee for a non-executive board chair was $48,834 and had risen 15.3 per cent over the previous 12 months.

The institute's chief executive, Ralph Chivers, said the increase was probably the fees "catching-up" with the amount of work board heads did.

"Their workload can easily be double [or] three times as much than an ordinary director," Chivers said.

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"They often play a public role and in cases where the organisation is going through some significant event, let's say a takeover, or for example like what Telecom did when it separated ... the chairman has got a very substantial role to play in managing the affairs of the company through those kind of events."

As well as this, Chivers said, board chairs were likely to be doing more to ensure they met the required standards in the wake of finance company prosecutions.

In the case of Nathans Finance, for instance, Justice Paul Heath ruled that directors held a "non-delegable duty" to form their own opinions on whether offer documents contain misleading statements. They could not assign this task to senior management.

"A lot of companies have got continuing offers in the marketplace for debt or equity or securities of different kinds. It would be no surprise to anyone that people who are in that situation have been paying a lot more careful attention to the details of those offerings and perhaps being extra careful and that of course means extra work," Chivers said.

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"Like in any situation the diligent ones will try harder even though they probably didn't need to in response to the kind of scrutiny that's happened," he said.

Shareholders' Association chairman John Hawkins said a fee increase of this size should be a "one-off" and not repeated in future years.

"An increase is probably justified providing the chair and the board are not fobbing this additional risk management work onto subcommittees. It's got to reflect the actual work being done. We would make the comment also that essentially the law hasn't changed, it's just that people have become more aware of their liabilities under the law and so understandably are applying stronger governance, which we see as a good thing."

While median chair fees were up by 15.3 per cent, the survey found non-executive director fees were up by only 2.9 per cent.

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According to dsd Consulting, which conducted the survey with the institute, this 2.9 per cent increase was below traditional levels and mirrored the wage or salary increases other workers were getting.

"The fact that [an increase of] 3 per cent is consistent across all sectors and career levels from the shop floor to the boardroom is, in itself, a significant finding. It shows a degree of conservatism towards executive remuneration which has traditionally increased at around 5 per cent" dsd Consulting's Una Diver said.

The survey found the median fee received by male directors was $39,553 and the median fee received by female directors was $24,500.

But Chivers said this, in itself, did not show women were being paid less than men for doing the same job.

"The variance is reflective of the significant representation of women on not-for-profit boards (three times that of men) and the fact that more than half of women held directorships in organisations with revenue of less than $5 million per year," he said.

Female directors represented 17.3 per cent, or 278, of the survey's sample of 1610 directors.

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Pay to chairmen of some of NZ's biggest companies
* Fonterra: Sir Henry van der Heyden - $374,923
* Telecom: Mark Verbiest - $192,500
* Fletcher Building: Ralph Waters - $371,250
* Contact: Grant King - $210,000

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