Stakeholders holding company boards accountable: Strategic Pay

Strategic Pay's 2023 annual Directors' Fees survey has shown a shift in power from the board to its stakeholders, who are applying pressure to improve its ESG performance and reporting. The survey gives insight into trends and practices relating to the payment of directors' fees in New Zealand, which provides valuable data that can drive change and inform decisions.

As was the case last year, environmental, social and governance (ESG) and diversity were key areas of interest to investors and stakeholders.

At a directors' fees level, there is still a significant gap of 20% between males and females, and this year female representation among directors and chairs increased, but only marginally. The survey reported 39% female directors (up slightly from 38% in 2022) and 25% female chairs (up slightly from 24% in 2022).

However, the growth in female representation among boards has been in the lower-paid not-for-profit sector. In contrast, the private higher-paying industry still has a relatively low female representation of 28%.

Research conducted by McKinsey found that companies in the top quartile for gender diversity on their executive teams were 25% more likely to have above-average profitability than companies in the bottom quartile.

New legislation passed by the New Zealand Government in June 2022 making climate-related disclosures mandatory for publicly listed (NZX) and larger financial service entities, coupled with the North Island's extreme weather events earlier this year, has further heightened pressure to make improvements among organisations to achieve net-zero emissions. 

"Boards are being held accountable more than ever to improve ESG performance and we're seeing a higher standard of sustainability-related reports being produced," comments Cathy Hendry, managing director at Strategic Pay. "This can prove challenging in the current climate to attract and keep quality board members within lower pay brackets."

Meanwhile, chairs' and directors' fees in the private sector continue to increase.

Last year, chairs of companies listed on the NZX were paid 69% more than chairs of unlisted companies, compared to this year's gap of 71%. Similarly, directors of companies listed on the NZX were paid 78% more than directors of unlisted companies, up from 71% in 2022.

"It's expected that the skills shortage will continue throughout the rest of 2023. Organisations should focus on their core purposes, including but not limited to fair pay and workforce diversity, in order to retain quality employees," concludes Hendry.