Sharechat Logo

Growing company complexity demanding more time from directors, report finds

Friday 10th August 2018

Text too small?

New Zealand directors have to devote more time to ensuring the firms they oversee are meeting the growing regulatory demands in an increasingly complex environment, a report shows. 

A typical director spends 127 hours a year on board matters in what's ostensibly a part-time position compared to 106 hours last year and 88 hours in 2014, according to the Insitute of Directors and EY directors' fees report 2018. EY New Zealand partner Una Diver says that time spent is probably under-reported given directors are responding to things in real-time. 

For that time, the median fee is $45,000, up just 2.3 percent from a year earlier, while taking on legal liability accompanying fiduciary duties and health and safety requirements. About 58 percent of non-executive directors surveyed said they were happy with that pay. 

"The breadth of kinds of risks directors are having to focus on and are expected to be on top of is far greater than the past," Diver said.

The report canvases 2,158 directorships, 792 Institute of Directors members and 1,546 organisations spanning listed and unlisted company, not-for-profit entities, statutory boards and state-owned enterprises. 

Institute chief executive Kirsten Patterson said the environment for directors has become much more complex and demands a new set of skills to keep pace and oversee sustainable organisations. Many boardrooms are lacking in digital skills at a time when technological evolution and changing consumer behaviour places greater demands. 

Still, board pay is often a bone of contention for shareholders who still use remuneration resolutions at annual meetings as an opportunity to voice their discontent. 

"Directors' fees should be transparent, fair and reasonable," Patterson said. "Boards should support and justify fees with good disclosure, governance and accountability practices." 

Alongside the increased regulatory demands from the Financial Markets Conduct Act and health and safety legislation, boards are also coming under pressure to improve their own diversity and address a broader array of issues, such as cybersecurity, climate change and reputational risks, and defend an entity's social licence to operate. 

On top of that, directors face increased disclosure obligations for NZX-listed firms to include knowledge a reasonable director or senior manager should have known as well as actual knowledge. The Institute told NZX that obligation was causing directors to spend disproportionately more time "on conformance than performance" and could put some people off pursuing director roles. 

Financial Markets Authority chief executive Rob Everett disagrees, saying the market watchdog encouraged the stock market operator to go down that route and align itself with the ASX. He's more concerned about the "smaller pool of people" willing to join boards of smaller companies "where directors really make a big difference." 


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Updated: NZ central bank cuts rates, signals more to come
Ardern, Macron to chair meeting to stop social media's use in terrorism
NZ commodity prices lift in March, led by dairy
Barfoot sees regained momentum in Auckland sales amid flat prices
House prices rose in February but sales volumes fell 9.5%
NZ commodity prices continue to lift in February
Rising house prices put pressure on affordability through tail-end of 2018
Standard & Poor's lifts NZ's outlook to positive
Fuel imports drive NZ's annual trade deficit to 11-year high
RBNZ plucks bank capital numbers out of the air: Reddell

IRG See IRG research reports