Our annual review of changes in ASX 300 board director fees revealed a modest increase in fee levels.
We compared the fees paid to 806 non-executive directors (NEDs) in 2014 and 2015. The median increase was 2.3%. This is higher than in 2014, when the median was 0.9%.
NEDs who changed roles (e.g. from director to chairman) were excluded from the analysis, as were directors who were not on the board for the full two year period. The ASX 300 market capitalisation of the companies in the sample ranged from $89 million to $129 billion.
Within the 446 (55%) of the 806 NEDs whose pay increased, the median increase for non-executive chairmen was 5.0% (6.8% in 2014). While that may appear somewhat higher than recent executive increases, keep in mind that boards adjust fees only every other year, on average, rather than annually.
That table below indicates the distribution of fee increase for those that increased director remuneration. Note that total remuneration was considered unchanged if the change was less than 1%, in order to exclude the impact of superannuation adjustments and payroll timing over the two years.
Table 1: NED remuneration adjustments (where remuneration was increased)
The fee increases were roughly inline with the 2014 increases (see HERE).
We derived our results by analysing the change in non-executive director remuneration from 2014 to 2015 with data downloaded from GuerdonData®. To validly determine the rate of increase, we calculated the change in fees for each individual NED (this is the ‘incumbent-weighted’ increase).
A 2.3% increase in NED total remuneration represents about $6,000 on the median fee of $179,000.
The average (as opposed to the median) incumbent-weighted increase was 4.9%.
Table 2 below shows a summary of the changes for chairman and directors. Relative to the prior period, there was an increase in the proportion of NEDs receiving an increase in 2015 and a similar decrease in the proportion of NEDs experiencing a decrease in fees.
Table 2: Median change in total remuneration and percentage receiving an increase/decrease
|Median change in total remuneration||1.2%||2.5%|
|Percentage whose total remuneration increased||48%||57%|
|Percentage whose total remuneration was unchanged||42%||32%|
|Percentage whose total remuneration decreased||10%||11%|
Both chairmen and directors have experienced a shift away from share-based awards, with the average mix we reported in 2014 including 4% share-based payments compared with 1% in 2015. It is important to note that while disclosures identify all grants of equity made in addition to fees, they do not necessarily identify equity purchased through fee sacrifice. Additionally, many of the companies that have “dropped out” of the ASX 300 over the past year have been resources companies (due mainly to reductions in commodity prices). This sector provided most of the equity-based compensation in the past. They have been replaced by companies that are do not typically provide equity to NEDs.It is also important to note that some increases are the result of increased responsibilities rather than an increase in fees. A sample of NEDs who have been in that role with the same company for at least two years will, on average, be more experienced than a sample that includes NEDs who have only been in the role for one year, and is therefore more likely to include directors who have been allocated additional responsibilities, such as more committee roles or other responsibilities attracting additional fees over the two years being considered.
Table 3 summarises the overall 2015 disclosed NED remuneration structure.
Table 3: Overall mix of remuneration components
|Position||Cash Fees||Superannuation||Share-Based Payments|
Table 4 shows the percentage of NEDs receiving each component of remuneration from 2012 to 2015. Keep in mind, the percentages are calculated based on different incumbents over the past four years.
Table 4: Percentage receiving each remuneration component
|Position and Year||Cash Fees||Superannuation||Share-Based Payments|
|Other NEDs 2014||100%||85%||2%|
|Other NEDs 2014||100%||83%||4%|
|Other NEDs 2013||100%||83%||6%|
|Other NEDs 2012||100%||79%||7%|
Next month we will report more on NED fee changes by sector and company size.© Guerdon Associates 2022 Back to all articles