Debate regarding director remuneration has been fuelled by the escalation in the workload of company directors, onerous legal and regulatory obligations, and better disclosure of remuneration arrangements for directors. In addition, investor groups have lobbied for the removal of tenure-based arrangements such as retirement benefits, while at the same time calling for directors to reduce their workload by relinquishing multi-directorships.
These factors have contributed to significant growth in NED fees during the past two years, evidenced by the AGM resolutions presented to shareholders for increases in director fee pools. For example, 17 of the 20 largest ASX-listed companies have increased their aggregate fee pools during this period.
Perhaps the most significant single impact on NED fee growth, however, has been the widespread action to cease the provision of retirement benefits to directors, most commonly by “freezing” entitlements at a specified time (although as we discuss later, the term “freezing” has meant different things to different companies!). In most cases, directors’ fees were increased to compensate for the removal of the annual retirement benefit accrual value.