Independent directors - how much do they cost and what value do they add?
David Newman, chief executive officer of the Institute of Directors, replies:
Taking the results of the PricewaterhouseCoopers Directors' Fees Survey issued in May, the average fee payable to non-executive directors is $23,900. The actual fees paid rangefrom $4000 to $60,000.
The fees are based on the company's size and complexity and the time commitment required from its directors.
A non-executive director, or independent director, which is the terminology now preferred, is someone who is not engaged in the day-to-day operations of the company and is thus expected to bring an outside view to the board table.
The attributes that an independent director brings to the board are:
1. A wider general experience of strategy formulation than is available within the company's senior salaried staff and an independence that is not influenced by considerations of career status or personal empire
2. An objective view of the performance of management in achieving the results set by the strategy of the company
3. The professionalism to ensure that the board has adequate systems to safeguard the interests of the company.
In simple terms, the board needs a number of part-time directors who do not have designs on anyone else's job, are not going to play internal politics and who do not see their career path as being influenced by their loyalty to the chief executive.
Send questions to Mentor: Ellen_Read@nzherald.co.nz. Answers will be provided by Business in the Community's Business Mentor Programme.
