GROWING COMPANY COMPLEXITY DEMANDING MORE TIME FROM DIRECTORS
AUCKLAND: 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 is ostensibly a parttime position, compared with 106 hours last year and 88 hours in 2014, according to the Institute of Directors and EY directors’ fees report 2018.
EY New Zealand partner Una Diver said time spent was probably underreported, given directors were responding to things in real time.
For that time, the median fee is $45,000, up 2.3% from a year earlier, while taking on legal liability, accompanying fiduciary duties and health and safety requirements. About 58% of nonexecutive 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,’’ Ms Diver said.
The report canvasses 2158 directorships, 792 Institute of Directors members and 1546 organisations spanning listed and unlisted company, notforprofit entities, statutory boards and stateowned enterprises.
Institute chief executive Kirsten Patterson said the environment for directors had become much more complex and demanded a new set of skills to keep pace and oversee sustainable organisations. Many boardrooms were lacking in digital skills at a time when technological evolution and changing consumer behaviour placed 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,’’ Ms 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 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 NZXlisted firms to include knowledge a reasonable director or senior manager should have known, as well as actual knowledge.