Longer hours, fees flat as pressure on directors continues to increase

Directors’ fees are little changed year-on-year with small rises for some offset by a 3.8 per cent fall in the median fee for non-executive directors. At the same time, hours worked jumped from 132 to 178 annually as many boards find themselves having to become more agile and responsive in the face of fast-moving economic pressures, the latest Directors’ Fees Report reveals.

Produced by the Institute of Directors (IoD), in association with EY, the report provides key information on director remuneration and board practices in Aotearoa New Zealand. This year, it brings together data for 4,077 directorships held by 1,148 directors across 1,752 organisations.

The median fee for non-executive directors fell to $50,000 in 2024 (down from $52,000 in 2023, and $51,529 in 2022). This was influenced by an increase in the number of survey respondents in low-remuneration or pro-bono positions.

The median hours worked by non-executive directors rose to 178 (up from 132 in 2023, and 111 in 2022).

IoD General Manager of Learning and Engagement Dr Michael Fraser says both pressure on fees and increasing demands on time are familiar territory for directors. This is the second consecutive year the number one reason for turning down a governance role was the time commitment, he says.

“There is certainly a feeling in the governance community that organisations need more support from their boards than in the past,” says Dr Fraser. 

“Economic uncertainty, global volatility, regulatory complexity and increasing expectations from shareholders and stakeholders make the current operating environment extremely challenging.”

Dr Fraser highlights the current New Zealand economic conditions, uncertainty around the disruptive influence of new technologies such as AI, and increasing requirements to consider aspects not previously accounted for, such as climate, as key challenges for boards.

“When you add to that geopolitical uncertainty and legal risk that can, in some circumstances, become a personal liability for directors, even the most experienced are having to constantly scan the horizon and ask, ‘how can I add more value to my organisations, what else can I do to support management, and how can my boards stay agile in a fast-changing world?’.

“While the idea that we are in a ‘permacrisis’ is perhaps overused,” Dr Fraser says, “this sustained increase in hours over the past few years is exactly what we saw during Covid-19. I suspect that board input is increasingly being sought by management to help smooth out short-term issues, they are not just the guardians of long-term strategy anymore.”

Economic factors are putting downward pressure on fees, but the decline in the median non-executive directors fee this year also reflects changes in the survey sample, says EY New Zealand Partner, Reward, Una Diver.

Diver notes there is a ‘people’ component to the drop.

“An increase in the number of respondents at the lower end of the fee scale has had some impact on the data,” Diver says, “but the trend over the past few years has been for little change in director fees. 

“It is also important to note not all governance roles are paid. For example, 60.6 per cent of trustees are unpaid, and one in five (20.7 per cent) of all respondents were in a pro bono role in 2024.”

Female respondents were more likely to be in a lower-paid role, Diver says, serving on the boards of smaller organisations, and this year saw an expansion in the gap between the median fee for male and female non-executive directors. In 2023, women earned 7.1 per cent less than men at the median. This year, the female median was $45,000, 10 per cent less than the $50,000 male median.

“Fee movements are not universal. For example, trustee fees rose 13.8 per cent, albeit off a very low base rate. However, it is disappointing to see the gender pay gap grow in our flagship statistic.”

Diver says director fees are substantially determined by the industry and size of the company, with large variations across sectors, and even boards in the same industries, so it is not possible to divide the median fee by the median hours to understand director remuneration. 

“These factors are reflected in the variety of movements seen this year and are one of the reasons this report can be so valuable when nomination and remuneration committees – or indeed shareholders – are trying to benchmark the fees paid to their directors.”

When viewed by industry, mining saw the largest average fee rise for directors, at 13.1 per cent, while the smallest rise was in professional scientific and technical services at 1.8 per cent. In the not-for-profit (NFP) sector, directors received an average rise of 5.2 per cent, but again off a low base compared to their for-profit colleagues, Diver says.

“With more than 115,000 NFP organisations in New Zealand, it is not surprising that 42.9 per cent of directors who completed the survey served on one or more trusts and/or were on the governing body of one or more NFP organisations (39.9 per cent),” she says.

“As previously mentioned, many of those roles receive no payment, but most people take them on to support a cause (37 per cent) or give back to the community (36.7 per cent). 

“Among those in paid NFP roles, 65.9 per cent were satisfied with their remuneration, as were 43.7 per cent in unpaid roles. This contrasts sharply with the satisfaction with fees in Crown entities, for example, which was zero per cent (down from 26.7 per cent in 2023).”

This year marks the 10th anniversary of the IoD/EY Directors’ Fees Report. When launched in 2015, the median fee for non-executive directors was $41,610 (no gender breakdown) and the median hours worked was 124–54 hours fewer than today. That shows how quickly the governance community has changed, says the IoD’s Fraser.

“This idea of a ‘permacrisis’ presents a challenge to the traditional idea, widespread in 2015, that governance is something the board does at regular meetings – while management runs the business. Boards are finding they need to review strategies more frequently in response to real-time data and ongoing disruption,” Fraser says.

“We are seeing New Zealand boards lean into these challenges and accept they need to spend more time on their roles. This will remain vital if New Zealand organisations – from NFPs to publicly listed companies – are to thrive into the future.”

The full Directors' Fees 2024 Report contains comprehensive detail and is available for purchase here.