27 Apr 2021

Directors' fees fall, public and private sector gap widens - survey

6:37 pm on 27 April 2021

Directors' fees have fallen for the first time in nearly a decade as the gap between public and private organisations widens, according to a new survey.

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The survey by business consultants Strategic Pay showed a 2.4 percent fall in the median fee for non-executive directors, which was put down to a "tough and unusual 2020" largely because of the pandemic.

The chairs of organisations suffered a bigger fall, 6.3 percent, while the private sector pay rates were significantly ahead of the public sector.

Strategic Pay managing director Cathy Hendry said the fall in fees had no doubt been caused by organisations looking to cut costs as much as possible during the pandemic, even as the workload had increased.

She doubted the fall in directors' fees would last.

"The long-term effects of the pandemic are likely to be minimal, and ... fees are expected to bounce back within the next two years."

She said the growing disparity between what directors of public organisations were being paid and the money available for private groups was more significant.

"With fees at small private-sector organisations often equivalent to those at some of our largest Crown-owned entities, it's a sad reflection of the value being placed on governance roles inside some of New Zealand's largest organisations," Hendry said.

"Predictions are that this gap will only continue to grow over time, severely limiting the appeal of public sector board roles, and therefore the pool of talent available to serve in these positions.

"I'd expect this to be a significant cause of concern for policy makers," Hendry said.

The median fee for directors was $40,000, but listed companies were paying 68 percent more than public organisations. The median fee for chairs was $70,000, with listed companies paying 62 percent than public bodies.

The survey also showed progress was being made in bridging the gender gap on boards, with 23 percent of chairs and 37 percent of directors being women. Hendry said this in part reflected the greater effort made by the government and official bodies to have women in governance roles.

However, she said if private fees kept growing at a faster rate than public sector payments then it would exacerbate a gender pay gap in the country's boardrooms.

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