ACSI’s 12th annual review of board composition and non-executive director fees in Australia’s largest listed companies

ACSI released their study of 2012 ASX 200 board composition and non-executive director fees on 25 September 2013.

The study indicates that median fees paid to company chairmen in the ASX 100 have fallen 5.1%, while the median fell 10% in the ASX 101-200 group. Yet the median fees for other non-executive directors in the ASX 100 remained flat, and in the ASX 101-200 they increased by 5.5%. While overall executive remuneration does rise and fall with performance, this generally does not apply to non-executive director fees. The ACSI NED fee findings appear unusual, and we suggest boards do not act on this information without seeking out another source of data, or commissioning a study that specifically addresses the situation at their company. Alternatively, wait until we will explore NED fees more fully in our annual NED fee market review published in February (see HERE for our last review).

ACSI’s research shows ASX200 boards have more women, has a higher median age (with the notable exception of the women directors), and that there is an increasing number of ‘first time’ directors are being nominated to these larger companies.

Results show that while gender diversity is improving, the rate of change remains slow across the Top 100 and even slower among companies in the S&P ASX 101 – 200. Results of the study show that:

  • women account for less than 10% of all individuals serving as directors of ASX 101 – 200 companies, a slight improvement over 2011, and
  • more than half of ASX 101-200 boards again had no female directors in 2012.

It was interesting to us that more women than men occupied multiple board seats as “professional directors”. The inference is that women who are well qualified as directors are perhaps in short supply and, consequently, may receive more opportunities than men for board seats. We see more of the same women turning up on multiple boards. So, while ACSI and other governance stakeholders are strong and successful advocates for more female representation on boards, they are not quite as successful in actually getting more women to become directors. This has been recognized elsewhere by ACSI and by others, including the Australian Institute of Company Directors (AICD), which has active director development programs aimed at women. On ACSI’s part, they have also focussed significant attention on company diversity reporting as a means to focus on the “pipeline”. But, as expected, these development programs are longer term in nature, and cannot meet current supply needs, where first and foremost companies need directors with the right experience, qualifications and skills. Hence, as we are see in the ACSI review, larger companies are more successful than smaller companies in getting the limited supply of qualified women on their boards, given that the gig is usually more interesting, career enhancing, challenging and pays more.

ACSI differed with many companies that considered their directors independent, whereas ACSI classified them as affiliated. This reclassification by ACSI occurred where some non-executive directors received share options on similar terms to those held by executives. This group accounted for 23 per cent of the ASX 101–200 directors but just 5 per cent of the Top 100 directors, indicating the high number of resource companies included in the ASX 101– 200. These companies frequently make substantial option allocations to non-executive directors as part of their remuneration arrangements in lieu of cash fees in order to conserve cash for exploration and development. Given their cash situation, these companies are probably doing the right thing by their shareholders. However, Australia’s rules on the taxation of share options means that often the non-executive director options are provided with forfeiture conditions to defer tax until they are actually worth something, and thereby a conflict of interest arises because the conditions often mirror those of the executives.

See the ACSI report HERE.

© Guerdon Associates 2024
read more Back to all articles