As we enter a new year, it is time to review remuneration changes for ASX 300 board chairmen and other non-executive directors (NEDs).

Overall

NED fee changes in companies listed on the ASX 300 between FY2021 and FY2022 were analysed. Altogether, there were 985 same incumbent full year chairmen and other NEDs across 223 companies in the sample.

In our last review (SEE HERE), the COVID-19 pandemic appeared to contribute to the low remuneration increases for NEDs. This past year, post-pandemic economic recovery in 2022 saw business thrive and an increase in NED remuneration.

The median increase in remuneration was 3.79% for chairmen and 4.36% for other NEDs. This is a significant change from last financial year where the median increase to remuneration for chairmen and other NEDs was 0.00% and 0.04% respectively.

Table 1 presents the change in fees, broken down into chairmen and other NEDs.

Table 1: Chairmen and other NED remuneration adjustments by position

Table 2 shows the breakdown of changes in NED total remuneration.

Table 2: Percentage of NEDs by change in remuneration

 

The percentage of all NEDs who experienced an increase in remuneration in FY2022 increased to 79.59% from 50.05% in FY2021. In the sample, 75.16% of chairmen experienced an increase in remuneration up from 48.32% in FY2021.  Similarly, 80.46% of other NEDs experienced an increase in remuneration in FY2022 compared to 50.38% in FY2021.

Conversely, the percentage of NEDs with remuneration that was either unchanged or decreased during FY2022 is significantly lower when compared to FY2021. For chairmen, 11.18% saw no change to their remuneration during FY2022. The same was true for 9.83% of other NEDs; a sharp contrast to FY2021’s figures of 24.83% and 20.28% respectively. Only 13.66% of chairmen and 9.71% of other NEDs saw a decrease to their remuneration during FY2022 compared to 26.85% of chairmen and 29.34% of all NEDs and in FY2021.

Table 3 shows the summary statistics for fee increases during FY2022, compared to FY2021.

Table 3: Chairmen and other NED remuneration increases by board role

There were more chairmen and NEDs that experienced an increase in remuneration during FY2022 than FY2021. While the median percentage increase to remuneration for these chairmen was 6.41%, marginally lower than 7.11% in FY2021, other NEDs which received an increase in remuneration saw a larger median increase of 7.11% compared to 6.37%.

Figures 1 and 2 display the distribution of total remuneration in FY2021 and FY2022 for chairmen and other NEDs.

The majority of chairmen in FY2022 were paid between $200,000 and $400,000 compared to FY2021 where the majority of chairmen were paid between $150,000 and $350,000. The large number of chairmen who had an increase in their remuneration coupled with the large percentage increase meant that there are now very few chairmen with remuneration below $150,000.  There are also more observations towards the higher end of the total remuneration distribution in FY2022. A similar distribution for other NEDs is also observed.

Table 4 shows the change in remuneration based on these quartiles for chairmen.

Table 4: Chairmen median and average change in remuneration by company size

 

Table 5 shows the change in remuneration based on the quartiles for other NEDS

Table 5: Other NEDs’ median and average change in remuneration by company size

Chairmen in companies with market capitalisation in the second quartile between $870m and $2,248m experienced the largest median increase in remuneration at 5.11%. In contrast, the largest median increase in FY2021 was a mere 0.78% and occurred for chairmen of larger companies with market capitalisation in the third quartile.

Chairmen of the smallest and largest companies in the top and bottom quartiles had the smallest median increase to their remuneration.

A trend similar to the chairmen can be observed for all other NEDs. The largest median fee increase for all other NEDs was 6.64% for NEDs of companies with market capitalisation in the second quartile. In FY2021, the largest median increase was 0.04%.

By Company Sector

Chairmen and other NEDs were divided into 11 groups based on the company GICS sector classification.

Table 6 shows the change in chairman remuneration based on GICS sector.

Table 6: Chairmen median and average change in remuneration by GICS sector

Sector	Number of chairmen	FY2022 Median	FY2022 Average	Median % Change	Average % Change
Communication Services	9	$357,000	$379,087	4.14%	3.76%
Consumer Discretionary	20	$256,431	$305,702	6.44%	17.11%
Consumer Staples	10	$351,001	$424,826	1.88%	3.92%
Energy	9	$242,092	$329,487	0.96%	-2.54%
Financials	23	$451,125	$484,697	10.41%	18.24%
Health Care	13	$300,000	$391,655	2.26%	3.18%
Industrials	18	$312,493	$351,251	1.28%	4.06%
Information Technology	14	$239,041	$275,445	12.05%	11.79%
Materials	27	$270,221	$350,994	0.45%	-1.88%
Real Estate	15	$463,500	$376,656	11.11%	15.53%
Utilities	3	$603,000	$597,912	22.42%	38.54%
All	161	$305,000	$373,156	3.79%	8.63%

 

The median chairman fees in the Energy, Industrials and Materials sectors saw little change. The Utilities sector has the largest median chairmen fee and also saw the largest percentage increase of 22.42%. The second largest median percentage increase was the Information Technology sector at 12.05% which has the lowest median chairman fees.

The Materials sector had the fourth lowest median chairmen fee and saw the lowest median fee growth of 0.45%.

Table 7 shows the change in other NED remuneration based on GICS sector.

Table 7: Other NEDs median and average change in remuneration by GICS sector

Sector	Number of NEDs	FY2022 Median	FY2022 Average	Median % Change	Average % Change
Communication Services	50	$175,000	$197,703	4.52%	10.14%
Consumer Discretionary	96	$159,760	$175,698	7.77%	11.75%
Consumer Staples	52	$170,412	$196,450	2.49%	4.27%
Energy	39	$170,516	$184,041	2.26%	2.08%
Financials	125	$230,000	$241,575	4.45%	9.02%
Health Care	73	$187,000	$195,221	3.67%	5.11%
Industrials	101	$190,451	$181,496	4.76%	7.83%
Information Technology	59	$158,348	$163,937	9.29%	10.96%
Materials	150	$200,480	$216,003	3.86%	10.92%
Real Estate	66	$185,918	$189,503	7.34%	11.13%
Utilities	13	$249,800	$253,259	1.46%	1.31%
All	824	$183,940	$199,996	4.36%	8.82%

 

NEDs in the Information Technology and Consumer Discretionary sectors saw the largest increases in median NED fees with a median percentage change of 9.29% and 7.77% respectively. In FY2021, the increases in the respective sectors were 0.00% and 8.60%.

As detailed in our NED fee review last year, earlier research on ASX 200 COVID-19 remuneration adjustments (see HERE) revealed that Consumer Discretionary companies made up the highest proportion of temporary COVID-19 negative remuneration adjustments. These COVID-19 adjustments were typically a 20% reduction in board fees for 3 months with most reductions ending at the conclusion of FY2020. The consistent increases over FY2021 and FY2022 may be explained by an effort to return those fees to normal levels.

Methodology

The data was derived from GuerdonData®, which is the proprietary database by Guerdon Associates for executive and director pay for all companies in the ASX300. (Available for client subscription, to try our demo product, click HERE. For enquiries regarding a subscription, please contact us on info@guerdonassociates.com).

Companies with financial years ending in December or that are yet to disclose their 2022 annual reports at the time of analysis were not considered in the study. Similarly, NEDs that changed position during the time of study were removed from the sample, as well as those who were not in their position for the full 2 years. Companies that were only added or removed from the ASX300 during the duration of the sample time period have also been removed from the study.

The market capitalisation of companies was taken on a 30-day average up to the 30 June 2022. Therefore, for companies that were delisted between the end of 2021 and this time period, we were able to take their market capitalisation from that time period.

Exchange rates for directors paid in a foreign currency was taken as the daily average for the respective exchange rate during the relevant financial year.

Calculations and percentages were made on each NED’s change in remuneration.

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