ACSI: Board Composition and Non-Executive Director Pay in ASX200 Companies
30/11/2015
mail.png

ACSI has recently published its 14th report on the composition of S&P/ASX200 company boards. As in previous reports, focus is placed on director roles, gender, fees, tenure, age and ‘skin in the game.’

In the report, the statistics are given for two separate cohorts, the ASX100 and ASX101-200. The ASX100 included 657 individuals who held 787 board seats, while the ASX101-200 included 539 individuals who held 578 board seats. The average board size for the ASX100 and ASX101-200 was 8.5 and 6.6 members, respectively.

The following summarises the findings presented in ACSI’s report:

Executive and non-executive directors

  • For the ASX100, the proportion of board seats held by non-executive directors increased from 84.4% to 85.0%. For the ASX101-200, it increased from 80.8% to 82.2%.

Independent directors

  • Proxy advisors in Australia recommend that that majority of a company board be independent.
  • For the ASX100, the proportion of independent directors increased from 89.6% to 90.6% and from 72.9% to 77.3% for the ASX101-200.

Affiliated directors

  • 12.5% of board seats in the sample held be certain directors were considered affiliated
  • For ACSI, one of the reasons that a NED was considered affiliated was if he/she held options
  • None of the ASX100 directors held options, while 9% of affiliated directors in the ASX101-200 were considered affiliated for that reason

Board diversity

  • Over last 10 years, the proportion of board seats held by women has doubled to 179 seats.
  • For the ASX101-200, women hold only 13.7% of board seats, and across the ASX200, less than women hold 20% of board seats.
  • ACSI started a new policy February 2015 in which women should make up 30% of directors on the boards of ASX200 companies by end of 2017.
  • The women directors tend to be younger, so appointing women directors appears to be a double whammy for diversity. This year’s study shows that 62% of women on boards are aged 40-60, against just 27% of men. In contrast, nearly three-quarters of male non-executive directors are aged 60+.

Professional Non-Executive Directors

  • A professional non-executive director is defined as an individual holding more than one board seat in the sample group.
  • 3% of directors were considered professional NEDs in the ASX200. Of these, 120 held two board seats, 45 held three board seats and 9 held four board seats.
  • Consistent with last year, and supporting a view that there may less qualified women known to be available than men, women directors hold more board seats than women. Of the 258 directorships held by female directors 95.4% were non-executive roles whereas of the 1,107 board seats filled by male directors only 81% were non-executives roles.

New entrants to ASX200 director pool

  • In the ASX100, there were 93 new director appointments of which 57 had never been an ASX100 director previously.
  • Over 40% of the new ASX 100 appointments were women, whereas, only about 26% of the ASX100-200 new NEDs were women.

Director Age

  • There is very little variation between the ages of ASX100 and ASX101-200 director pools.
  • However, in the ASX200, female non-executive directors are on average 6 years younger than male non-executive directors.

Tenure

  • In the ASX100, the tenure of male NEDs equalled 6.6 years (increase from 6.5 years in 2013) and the tenure of female NEDs equalled 4.2 years (same as in 2013).
  • There were 15 ASX100 NEDs who had been in office for more than 20 years. This number declined to 9 NEDs for the ASX101-200.

Remuneration of Non-Executive Directors

  • Non-executive director remuneration included fees, travel allowances, non-monetary benefits, accounting value of options granted and ‘special exertion’ fees.
  • For the ASX100, the median non-executive director pay was $217,196 and the non-executive chairperson median fee was $439,650.
  • For the ASX101-200, the median NED fee was $125,000. The median non-executive chairperson fee was $216,237.
  • For the ASX100, director fees have slightly increased (less than 1%) and fees have decreased for chairmen. The opposite was true for ASX101-200.
  • There is little evidence of gender-based discrimination in non-executive fees, which has been the finding over the last few years as well.
  • The average fee for female ASX100 NEDs was $214,070 and for males was $218,298. For chairperson fees, the difference was more significant, with female and male chairpersons receiving on average $504,473 and $458,250, respectively. However, the female chairperson sample size of four is extremely small, which could account for the disparities in pay.

Skin in the Game

  • ACSI defines skin in the game as “personal ownership in each of the companies they [directors] govern.”
  • This is the second year this analysis has been included in ACSI’s study over non-executive director pay, and ACSI’s emphasis is also reflected in their updated governance guidelines (see HERE).
  • This is done by taking each director shareholding at a certain date and multiplying number of shares by closing share price that day. This value ranged from $0 to $5.29bn in the ASX200.
  • Only 12 executive directors had no skin in the game. Overall, 181 individual directors had no skin in the game.
  • Some companies require directors to own company shares (usually set as percentage of salary) that they have to acquire and maintain for a certain period of time.
  • The ACSI study was based on disclosures that could not reflect the tax changes to equity that could encourage more effective director share ownership (see HERE).

To read the full ACSI report, see HERE.

© Guerdon Associates 2021
read more Back to all articles