KEY POINTS:
Boardroom pay at New Zealand's big companies is soaring as businesses fight to attract new blood and retain key staff, according to a new study.
The study, by corporate advisers Egan Associates, shows that fees paid to chairs of the major companies have reached an average $114,121, while
fees for non-executive directors now average $65,842, up more than 25 per cent over two years.
In comparison, the average Kiwi wage rose by just 4.1 per cent in the 12 months to June, to $38,900. And that's for a 38-hour week. Directors, on the other hand, are expected to attend a meeting once a month.
Many hold numerous directorships. Former KPMG boss Alan Isaac, for example, retired from his fulltime position last year, but now sits on the boards of New Zealand Golf, NZ Cricket, New Zealand Trade and Enterprise and the NZX.
Key factors influencing the boardroom bonanza, according to the study which surveyed our Top 50 listed companies, include competition - international expertise is in demand as companies expand their operations globally - changing governance expectations, and an increasing interest by companies in independent, rather than "group-think" directors.
It may sound all too familiar to the hardworking Kiwi, whose wages hardly compete internationally either.
But, says Jens Mueller, of Waikato University's management school, drill down and you'll find most New Zealand firms still pay their directors 50 to 150 per cent less than similar-sized operations in other countries.
Standard fees for most NZ directorships are around $30,000 to $40,000, with the best paid relatively concentrated - last year, 28 directors on 35 boardroom seats received at least $100,000 a year from a company. Non-executive directors' fees for the top 300 Australian listed entities now average $194,602.
"And this is one area that you can truly compare apples with apples," Mueller says. "If you consider the value a director creates then that value is the same whether it is here or in Australia - the director is doing the same job."
Mueller, who recently published the results of a governance survey of 1200 small, medium and large-size businesses, says changes in shareholder and stakeholder expectations have prompted a demand for independent directors, with more than half of the firms looking to take on at least one over the next five years.
Independent directors are particularly valuable because they challenge what a firm is doing, and add new eyes, he says.
"It is a dramatic change from previous thinking. New Zealand has a unique situation where a lot of firms are family-owned, land-based, agricultural firms. It's pretty clear that where it used to be mum and dad and son and daughter and maybe a cousin or two sitting around the kitchen table creating a board for the company, that's no longer happening."
Interestingly, Mueller's survey found that many directors would work for free, or to do good; they do not rank fees and benefits as a high attractant for directorship.
And that, he says, is a sign of a good director.
"Directors are charged legally with the observance of the shareholder rights, they are elected by shareholders. They are not there to look out for themselves, they are agents for the shareholders.
"We asked potential directors, people with practical expertise, what it would take to get them to become directors. We threw out the whole nine yards - fees and benefits, prestige, publicly listed firms with private jets. The response was no thank-you."
Bruce Sheppard, outspoken Shareholders Association chairman, doesn't buy the argument that directors are worth the same as industry chiefs.
"And that's how they see themselves. They look at what accountants and lawyers are earning and say 'well, that's what we should be earning, how many directorships can we do?"'
As well, smaller companies are generally perceived to be less complex and have fewer risks involved than larger ones, when the reality was that smaller firms often had more risks and are more likely to fall over than bigger ones, "yet larger companies persisted in paying directors big money".
Because fees are a function of international pricing, there is a perception that because New Zealand directors could be poached they should be paid at international level.
"None of those presumptions are true. All a big company is, is a conglomeration of little businesses. The art of being a good director of a big company is to work out how to break it down into little bits. If you cut away the crap, it is fairly simple."
Like Mueller, he says, directorships are about public accountability, public responsibility and the collective responsibility of looking after assets.
"It's almost a social service job. So I figure people who do directorships should not be doing it for the money. They should be doing it for some other, greater purpose."
Remuneration over $30,000 was "probably too much. You can do justice to five directorships - that's $150,000 and for most New Zealanders that would pay the groceries."
Sheppard, who has 60 directorships (many of which he does not charge fees for) acknowledged that poorly paid positions were likely to attract underperforming candidates or "tired, useless old tossers", and that there was a need to attract new blood.
"But the problem there is that most 35- to 45-year-olds are at the peak of their income earning, how attractive is it going to be to take a board position on $30,000 a year... it is actually opportunity loss.
"You have to do this because you want to do something useful that makes the world a better place and your shareholders richer. And you can not be independent if you are just doing it for a wage cheque."
Don Jaine of management consultants Swann Group echoes those sentiments.
"If the first question a potential director asks about is remuneration, they are there for the wrong reasons. And that is absolutely the way it should be."
How fees compare with salaries
* Wayne Boyd, chairman Freightways, Auckland International Airport; director Telecom: $392,961
* Keith Smith, chairman Skellerup, Holdings, Tourism Holdings, Warehouse Group; director PGG Wrightson: $345,000
Rod McGeoch, chairman SkyCity Entertainment; director Telecom: $309,889
* Gary Paykel, chair Fisher & Paykel, F&P HealthCare, Appliances: $297,469
* Chief executive (general management): $175,000+
* HR Manager: $95,000
* Communications manager: $75,000
* IT consultant (1-3years exp): $70,000
* Teacher (HoD) : $68,300Nurse (five years' exp): $55,000
* Police officer (starting): $45,200
* Teacher (trained, entry level): $41,000
