How does your remuneration compare?
As you may know, I have collaborated with Governance Institute since 2015 to produce the annual Australian Board & Governance Executive Remuneration Survey Report. As in previous years, the 2017 report is based on remuneration data covering 1,021 boards and collected from 390 online contributors (mostly Governance Institute members), 261 boards which are ongoing contributors to the survey and 370 client boards of McGuirk Management Consultants.
Combined, 824 (81 per cent) of these boards remunerate either all directors, or a chair or a director. The report also covers remuneration data on board committees, MD/CEOs, finance executives/CFOs, company secretaries and governance executives.
The most comprehensive report of its kind in Australia, the report covers listed, unlisted, private, not-for-profits (NFP), government and superannuation boards and board committees.
All the remuneration data presented in the full report tables has been segmented by revenue, assets, full-time employees (FTE), type of organisation and type of industry.
Not surprisingly, the survey results are at their lowest level for ten years. Many boards did not increase remuneration at all and those that did, only did so marginally:
- private boards increased remuneration five per cent
- public company boards increased remuneration four per cent
- unlisted company boards increased remuneration three per cent
- NFP boards increased remuneration by two per cent.
For governance professionals and other senior executives, the rise was three per cent.
A measure by the Reserve Bank, called an Average Weekly Ordinary Times Earning (AWOTE), is running around 2 to 2.2 per cent which is not surprising given wages growth is at an all-time low. In fact recent, the Governor of the Reserve Bank made the point that workers shouldn’t fear job security, and challenged them to demand a greater share of the economy's profits saying this would drive up record-low wages growth and stimulate the economy.
However, I do not anticipate any turnaround in the short term. In fact, I expect increases next year of around four per cent for boards and two per cent for executives. Historically, boards will increase the same amount as its executive but when they conduct a benchmarking review there is no nexus between the two. In addition, the nexus for a board of a large global company like BHP is remunerated in line with global trends while large Australian entities set their nexus in line with the Australian market.
Also from a governance perspective, boards are increasingly seeking skills-base competencies with many transitioning to a ‘skilled’ board and recruiting accordingly; which can have significant remuneration implications. This is particularly the case for NFPs. For example, in the aged care sector, A specialist in palliative or geriatric care would be a valuable addition to the board but it is unlikely that person would be a director in a voluntary capacity. The more likely scenario is that they would be remunerated at the market rate.
Finally, I suspect next year will be on a par with 2017. However, by 2019 I would like to think we will see an upward trend as there is always a period of catch up after a slowdown.
Get your copy today
Members can download a complimentary extract from the 2017 Australian Board Remuneration Survey report.
If you wish to purchase the full report, call Terry McGuirk, Director, McGuirk Management Consultants (MMC) on (08) 8568 2866 or email firstname.lastname@example.org and advise if you are a member of Governance Institute.