The fee differential between men and women on company boards has widened in the past year, and one reason is the older men would rather be carried out of the boardroom than relinquish the chair
Caroline Rainsford was just 39 when she sat down at the Warehouse Group's boardroom table last year. Already a high-flying executive as country director for Google NZ, she joined the Warehouse board as a participant in the Future Director programme - not just a development opportunity for her, but in the expectation she would contribute her international knowledge and wealth of digital and strategic experience.
As with many new roles, there were immense challenges. She crosses the harbour from Kohimarama to the Warehouse's head office in Northcote, for the early morning meetings.
"I'm a solo mother with two children," Rainsford says. "The board meetings at the Warehouse Group start at 7.30am.
"You know, that's outsourcing my kids for the night prior, or having someone start incredibly early at my house to do school drop-offs. Being a director is not just something that you can just do and put on your CV. It's an enormous amount of work and commitment to the organisation."
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Rainsford is certainly not complaining; she understands that some in the community who are doing it tough will have little sympathy for relatively well-paid company directors.
But the point she's making is that companies need to think flexibly if they are to attract good, fresh talent to their boards. They need to have a clear view of the hours, and the workload, and the remuneration, and the extent to which it's a good opportunity for young executives trying to make their way in the world and pay the mortgage.
The Warehouse has a good chair in Joan Withers, who has allowed some flexibility, but Rainsford says she hears of many poor and inflexible chairs in other organisations. Board commitments and fee structures can no longer be set up as sinecures for older businessmen, fitting meetings around rounds of golf as they serve out their last working years before retirement.
Strategic Pay's 30th annual directors' fees report, supplied before publication to Newsroom, highlights worrying evidence that boards are going backwards. The survey of 401 public and private sector companies shows the gender pay gap has widened in the past year – it's nearly doubled to a 23 percent gap between male and female board chairs.
And long-serving directors (mostly men) are making themselves comfortable in the chair. The report finds that 22 percent of chairs have been on the board for 10 years or more: a five point increase on 2013, when only 17 percent of chairs were so well ensconced.
Governance experts say there's a particular problem with Founder's Syndrome, the difficult faced by companies when the founder maintains disproportionate power and influence as chair, and doesn't know when to step aside.
That's grabbing the headlines with the sexist and racist comments made about chef Nadia Lim by DGL Group founder Simon Henry. He remains the executive director and chief executive of the chemical manufacture and transport company, which has taken a $239 million pummelling on the NZX since he described Lim as "Eurasian fluff".
Yet it's become apparent over the past week that his board is unable or unwilling to rein him in; at last report Lim still hadn't received his promised apology for saying My Food Bag sold its IPO by showing off her cleavage in its prospectus.
DGL's board has only one woman, and the Strategic Pay survey shows such homogeneity is still commonplace in manufacturing, mining/petroleum, wholesale, fisheries and FMCG.
Strategic Pay managing director Cathy Hendry says everyone is shocked that people still hold views like Henry's. "It was like he's living in a bubble; he wasn't aware of how inflammatory and highly sexist those comments were," she says.
Median chair fees by company turnover
"I'm sure that their environment hasn't helped the situation. We are aware that bias exists and it's there all the time. And I'm sure that having a male-dominated board didn't help.
"That will feed through into how the board is run. Evidence has shown the more diverse you get, the greater the creativity, the different perspectives are going to come through, more likely to think outside the square than if you've got people who are all from very similar backgrounds thinking the same way."
Joan Withers echoes the view of Silvana Schenone, her co-leader on the women's collective OnBeingBold. Schenone said the behaviour you walk past is the behaviour you condone. "Unbelievable the apology still hasn’t arrived!" Withers says.
A dying breed
Graeme Nahkies, the practice Leader and (yes) co-founder of governance consultancy firm Boardworks, has been an active director and chair, and has seen the problem of those who don't recognise it's time to leave.
"And I don't want to name names, but they tend to be a generation that is leaving boards either because they're forced out or because they're dying, frankly. The people that came immediately to mind when you asked me that are people that are dead."
“Without pointing a finger at anyone, the longer they're there, the more essential they consider themselves to be, because of that iconic status or the fact that they have the institutional memory.” – Graeme Nahkies, Boardworks
"We get what the Americans call Founder's Disease [sic] where people well and truly outlive their capabilities, even though they were instrumental in founding quite significant organisations."
He says founders can be "very difficult to shift".
"Without pointing a finger at anyone, the longer they're there, the more essential they consider themselves to be, because of that iconic status or the fact that they have the institutional memory.
"It can get quite complex and each board's different, but I think the starting point - and certainly what we recommend - is that there be tenure limits in the constitution of the organisation, such that anyone joining the board, they know that their tenure is limited, and that they're not going to get extended except under exceptional circumstances."
Years in directorship role
Nahkies says the fact there are more men on boards means it is more likely to be them refusing to leave. "It is inevitably, unavoidably because of the antecedent situation associated with men. But I don't think it is solely a male problem, because I've seen enough women in similar situations who are very reluctant to leave boards when, if they were listening to the feedback or reading the room that they might have decided to step down."
Nahkies says directors should understand there are tenure limits and they have no more than 10 years on a board; some organisations set the bar lower still.
It's rather like the view expressed by American revolutionary founding father Thomas Jefferson, the third US president. He said in 1787 that "a little rebellion now and then is a good thing" as necessary in the political world as storms are needed to cleanse and refresh the physical world. "It is a medicine necessary for the sound health of government," he added.
“It's too easy actually to get into that sort of clubby sort of environment where people turn up as much because they enjoy each other's company.” – Graeme Nahkies, BoardWorks
So too, Nahkies agrees, it's necessary to bring fresh new talent and ideas on to companies' boards. All directors who take the job seriously should be open to moving off the board before they become institutionalised. "The board needs fresh talent and they need fresh fields to play in."
Should older men stand down? "I can really only speak for myself. I know that my natural term on a board is probably in the order of six or seven years. And beyond that point, I know that I become institutionalised.
"Despite my best efforts I'm just not as inquisitive as I was; I accept more on face value. I'm friendly with the management team. And it's a really nice, comfortable place to be. And it's too easy actually to get into that sort of clubby sort of environment where people turn up as much because they enjoy each other's company."
Back-tracking
Joan Withers is perplexed by the widening pay gap.
That's come after 10 years of improving gender diversity on boards. Since Strategic Pay started tracking the gender gap in 2013, the proportion of women chairs on the 400-plus boards it surveys has doubled to 24 percent, even higher in the public sector. And the proportion of female directors has increased from 24 to 38 percent.
That's also reflected in the NZX's latest diversity report, looking at the 187 companies listed on New Zealand's sharemarket.
She welcomes the evidence that board diversity is improving: "Certainly, if you're a white, late middle-aged gentleman, even as an experienced director, I would say it's a lot harder to get board appointments than it is if you're a woman.
"And there are no compromises that I've ever seen being made, with women appointees to either director or chair positions. These women are doing an incredibly good job. But it was absolutely imperative that we improve the diversity on boards, and that's been happening.
"Going backwards in terms of the pay gap for chairs is surprising, to say the least."
"We would expect director fees to continue to increase over the next 12 months. It will, however, be interesting to see whether the increased wage pressure and talent shortages will result in a relaxing of the pay restraint within the public sector." – Cathy Hendry, Strategic Pay
She says that increased representation is aided by a rule of thumb, on many boards, that directors should not service more than eight to 10 years. On ANZ Bank NZ, that rule is explicitly set at nine years, barring special circumstances. But she is concerned that women's pay is not increasing as their representation increases.
According to Cathy Hendry, that's because the boards of central government and local government-owned companies, where female representation is highest, are also those that have frozen pay. Meanwhile, the men appointed to private sector boards are enjoying increased fees.
“The public sector is doing a really good job at encouraging representation between males and females, but with that you are also seeing that they are also lower paying, which is having quite an impact on the median fees that you’re seeing paid out to chairs,” Hendry says.
"Organisations now consider operating within a pandemic environment as the new normal. Moving forward we would expect director fees to continue to increase over the next 12 months. It will, however, be interesting to see whether the increased wage pressure and talent shortages will result in a relaxing of the pay restraint within the public sector."
Withers agrees, and she has a solution: an incoming tide that raises all boats. She believes New Zealand companies need to pay directors better, commensurate with similar-sized companies in Australia.
For a while in New Zealand, it's been "open season" on company directors, with little sympathy for increasing their fees. But she argues good directors work very hard for their money, and carry heavy accountability.
"You know, it's quite sad, because every time we go up to shareholders, we've got to do a hell of a lot of work to justify an increase," she says. "But if you look at the ratio between a very senior experienced director and the chief executive of that organisation, you get a very interesting perspective. In Australia fees are certainly double, and up to three times higher."
She says directors should devote more time to fewer boards. It comes back to professionalising them, making governance a legitimate career path for young men and women, rather than that sinecure for the semi-retired.
And that means paying them better. "Directors can't afford to take on six or seven or eight directorships – they're just not going to be able to do justice to those roles," Withers says. "And that's something that investors or proxy advisors keep a close eye on. People will vote directors down if they think they're over-boarded. So you've got to remunerate people properly."
"It's not only gender, it's ethnicity and socio-economic background and age diversity as well. If you've got a senior executive that you want to pull out into governance, they're going to be making a significant salary sacrifice, moving from executive life into governance.
"It's about the passion that these people bring, it's about the relevance to what is happening today, which for those of us who are older, we're not digital natives and we're getting all the tuition we can to make sure we're up to speed with technology." – Joan Withers, The Warehouse Group
"And for many at those life stages, it's just a bridge too far when they're paying school fees, a big mortgage, whatever else they need. As opposed to someone who's 65 and has made their relative fortune. I think it is important."
She looks at some of the younger directors at The Warehouse Group, such as Rachel Taulelei and Caroline Rainsford.
Rainsford gets paid just $20,000 a year to sit as a Future Director on the board, yet the contributions she and Taulelei make are enormous.
She recalls one occasion when Rainsford suggested the board take two hours to focus on the company's emerging strategy around food and groceries.
"It's about the passion that these people bring, it's about the relevance to what is happening today, which for those of us who are older, we're not digital natives and we're getting all the tuition we can to make sure we're up to speed with technology," Withers says.
"But just having someone like that, sitting around the table, sharing the wisdom, is just valuable beyond belief."
