ACSI’s latest survey looks at changes in board composition and director fees
13/12/2016
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The Australian Council of Superannuation Investors (ACSI) has just released its 15th survey of S&P/ASX100 (ASX100) company boards, and the fifth year it has also covered the S&P/ASX200 (ASX200).

This year, ACSI and its research adviser, Ownership Matters, have focused on the changes they have identified in the board composition of these companies including in director roles, gender, director fees, tenure and age.

ACSI has again included its analysis of directors’ shareholdings – their ‘skin in the game’. Their message is clear – ACSI wants to see all directors hold company equity for aligning their interests with those of shareholders.

Some of ACSI’s key findings

There are new faces in the board room:

  • the ASX100 director pool increased by 44 people ‘new’ to that pool
  • the ASX101-200 included 47 new faces
  • 36% (31) of the new appointments (87) to the ASX100 were women
  • 30% (22) of the new appointments in the ASX101-200 were women

Gender diversity is improving, albeit very slowly:

  • 25.2% of directors in the ASX100 were women, up from 22.7% in 2014
  • 15.9% of directors in the ASX101-200 were women, up from 13.7% in 2014
  • In the ASX100, 40% of the individuals with more than one directorship were women
  • In the ASX200, 45% of the individuals with three or more directorships were women
  • In 2015, 143 women held 199 board seats in ASX100 companies. This 25% of the directorships in the ASX100 does compare favourably with the 8.3% in 2000.

This next finding of the ACSI survey may have unearthed an issue arising from the focus on getting more women onto boards. ACSI found that there was not a single executive director appointment across the ASX200 who was a woman in 2015. Similarly, in 2015, there were only six women executive directors in the ASX100 pool of 119 executive directors – this was down from 7 in 2014. It was even worse in the next tier of companies with only four executive directors being women in the pool of 97 executive directors in the ASX101-200.

This could be because the executive talent pool of women is shrinking as they move to take on non-executive director roles.

ACSI is finding that “less is more” when it comes to multiple directorships. If you think back ten and fifteen years, it was not uncommon to see some individuals on five, six and even seven ASX-listed company boards. With a few exceptions, the maximum number of directorships these days is typically no more than three. No director in the ASX101-200 held more than 3 seats in 2014 and 2015.

ACSI’s longitudinal analysis over fifteen years shows that, in round terms, about one-third of the directorships in the ASX100 are held by around 100 people. Specifically, in 2015 109 individuals held 245 director seats, being 36.6% of the ASX100 directorships.

The findings were similar across the entire ASX200 – 182 individuals held 418 directorships or 36% of the total of 1,170. The longitudinal analysis shows similar findings over the last five years.

We noted at the outset that ACSI wants to see directors hold shares in their companies and its survey critically analyses the holdings. Such a policy guideline may have implications for director independence, risk-taking, diversity, and it does not take into account the individual’s personal circumstances including age and cash flow, among other things.

There were 51 directors of ASX100 companies who held no shares in their respective companies. Importantly, however, 25 of these had been on the board for less than a year. The insider trading rules, blackout windows and timing of appointment as well as cashflow all limit an individual’s ability to purchase shares.

A clear implication of ACSI’s analysis is that it expects all directors to have some shareholding in the company after five years on the board. ACSI states that in the ASX101-200, “.. a surprising 14 people still owned no shares after more than five years on their companies’ boards….” ACSI’s report nominates the long-standing directors in various companies with no shareholdings.

The numbers are telling us that generational change is on the way.

  • 60% of the women directors are aged 40-60 while 37% of the male directors are in the same age bracket. 14% of the male directors are aged over 70, while only 2% of the women directors are over 70.
  • The average tenure of executive directors in the ASX100 was 6.7 years in 2015.
  • The average tenure of non-executive directors in the ASX100 was 5.9 years in 2015.

What happened with director fees, committee fees and chairman fees in 2015?

  • The average fees for an ASX100 NED in 2015 were $222,692, an increase of 2.5% over 2014
  • The average fees for an ASX101-200 NED in 2015 were $128,385, a decrease of 3% from 2014. The median still sits around $125,000
  • The average chairman’s fees in the ASX100 were $491,836, a 6.8% increase over 2014. The ratio is now 2.2 times that of the average NED.
  • The average chairman’s fees in the ASX101-200 were $237,721, a 7.5% decrease from 2014.
  • Average gross fees for a portfolio of three or more non-executive directorships in the ASX100 was $853,518.

Other findings included:

  • The average board size in the ASX100 is 8.3 directors
  • The majority of boards in the ASX101-200 had between 6 and 7 directors
  • The proportion of independent directors on ASX100 boards seems to have plateaued around 90%
  • The proportion of independent directors on ASX101-200 boards is around 79%
  • There are now 22 companies in the ASX100 with three women directors (up from 13 in 2014). Anecdotally, the influence and increased diversity of thought that comes with a critical mass of women on the board is more profound than when there is just one woman on the board.

The full report by ACSI can be found HERE.

© Guerdon Associates 2021
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