Retirement benefit arrangements for directors had their origin in a time preceding the introduction of compulsory SGC contributions. Although there was a surprising degree of variation in the formulae applied to the calculation of entitlements, most shared common elements of service period, average or aggregate fees paid over a specified period (such as the final three years of service) and an initial qualifying period. These arrangements were similar in nature to defined benefit superannuation.
Pressure to remove these arrangements in recent years stemmed from:
- Perceived additions to already generous retirement provisions with SGC “top-ups”;
- Shareholder and investor dissatisfaction with the notion of entitlements generated by tenure rather than merit, and
- The not uncommon coincidence of substantial payments with termination of board service associated with a company financial or performance crisis.