Directors are paying more attention to strategy, compliance and risk oversight as they tackle an increasingly complex business environment, with a record amount of time being dedicated to board matters since 2014.
According to the Directors’ Fees Report 2018, conducted by the Institute of Directors and EY New Zealand, the time spent by directors on board matters has increased from 106 hours in 2017 to 127 hours in 2018 – and is up a total 44 hours from 2014. Public scrutiny has played a significant role in the increase, with the oversight on performance and behaviour being described as ‘intense.’
“Nowadays there are more legislative and regulatory requirements, including health and safety changes,” said Institute of Directors chief executive Kirsten Patterson. “Directors must keep on top of complex risks such as cybersecurity and climate change. There is more disclosure, reporting and transparency expected on environmental and social impacts. For directors to lead sustainable organisations, they need to keep up with rapid technological advances, disruptive business models and engaged stakeholders.”
According to the report, non-executive directors’ median fees have risen by 2.3% in the past 12 months, and executive directors’ fees rose by 2.9%. Patterson says director fees should be ‘transparent, fair and reasonable,’ and boards should validate fees with good disclosure and governance practices.
The report also revealed that 76% of organisations provide directors with liability insurance.
“The report encourages boards to closely monitor how non-financial risk – including reputation and conduct – are identified, rated and remedied,” said EY New Zealand partner Una Diver. “Alongside their traditional duties around oversight, governance and risk, directors are also expected to be closely involved in the company’s broader impact on society. So they must consider and engage with all stakeholders on governance, social and environmental issues, not just shareholders.”
Ninety per cent (90%) of the organisations represented in the survey were New Zealand-owned, and this marked the first year that the report captured directors’ fees by market capitalisation. The full report is available for purchase from EY.
