Directors' Fee Report: Public Sector Boards will struggle to attract key talent

This article was produced in partnership with Strategic Pay.

Strategic Pay’s annual Directors' Fees Report has revealed a stark warning for the public sector, you may struggle to attract key talent to your boards.

“Those that fall under the core public service, fall under the public service commission who sets the pay,” says Cathy Hendry, ‘Strategic Pay’s managing director “and it’s basically like there are no increases, there hasn’t been for a couple of years.”

Hendry explained the quickly increasing gap would discourage people from serving on public sector boards. Serving on a private sector board would garner fees that are now almost four times the size of those in the public sector. “The private sector has started moving in terms of fees but because the public sector hasn’t, there’s this big gap,” Hendry told HRD

Hendry said there is a lot more scrutiny placed on board members these days. “You can't be a passive board member; you've got to be really active. There's a lot of liability and so if you're not getting paid for that, then you're probably going to be picky as to which boards you sit on,” Hendry told HRD.

One area the public sector is doing well in is encouraging diversity on their boards amongst females, Maori and Pasifika. Most public sector boards have a fairly even gender split. While that’s great, Hendry says the flipside is that it also contributes to a widening of the overall board representation gender pay gap. “When you look at gender across the whole board database, you see gaps because there’s so many females in the public sector.”

We have come a long way in terms of gender discrimination since the report was first published. The report celebrates it’s 30th anniversary this year making it the longest running directors fee report in New Zealand. Hendry says a report they have on file from 1991 still refers to ‘chairmen, “it was all male and quite clear there was no reference to females, and 39% of the directors were over 60,” said Hendry.

This year’s report also found economic recovery was bouncing back but we would be living with the effects of the pandemic for quite some time. Hendry said another interesting fact that was shared by the majority of directors was with everything going on around Covid, they were spending more time on risk management, and they actually wanted to focus on strategy.

Director’s fees year on year tend to increase. Unusually, for the first-time last year, there was a slight decline in directors fees, this decline has plateaued.

 The highest fees were paid to non-executive chairs within the mining, petroleum manufacturing industry – a fairly normal trend. Chairs of private sector publicly listed companies are paid 69% more than those of analysts at private sector organisations – again, a fairly normal trend.