By Nick Hurley

Non-executive Director Remuneration For Board Directors In Australia

Navigating the world of Non-executive Director Remuneration for Board Directors in Australia can often be complex and confusing.

Did you know that board chairs often earn triple that of the other directors? This blog post aims to simplify this topic by breaking down different types and rates of remuneration, factors influencing pay, current trends and handy negotiation tips.

Let’s dive into making sense of director fees in an Australian context!

Key Takeaways

• Non-executive directors in Australia typically earn from $20,000 to $275,000.
• Their pay depends on the company’s size, their duties and skills.
• Pay rates have stayed almost the same in recent years.
• Clear rules help to make sure that director pay is fair for all.
• Knowing about pay rates can help you when talking about your own pay.
• Doing good research will help you get a better deal when negotiating for your pay.

Understanding Board Director Remuneration

This section delves into the various types of remuneration methods that exist, and provides a snapshot of what Non-executive Directors in Australia typically earn.

Types of remuneration methods

Board Directors in Australia get paid in many ways. Here are some common methods:

• Cash Benefits: Most directors get a cash salary. This is the main part of their pay.
• Superannuation Contributions: Some companies add more money to their director’s retirement fund.
• Salary Sacrifice for Directors: In some cases, directors choose less salary. Instead, they get other perks like a car or health insurance.
• Small Business Director Payment: Small businesses might not pay much in cash. But they may offer shares in the company instead.
• Non-cash Benefits for Directors: These are extra things that a director gets as part of the job. It could be a nice office or use of the company car.
• Share Options: Some directors get to buy shares in the company at a very low price as part of their pay packet.
• Performance-Based Pay for Directors: If the company does well, the director may get extra pay.
• Termination payments.

Average remuneration for Non-executive Directors in Australia

The remuneration of non-executive directors in Australia varies significantly based on a range of factors, including the size of the company, the industry it operates in, and the specific duties and responsibilities of the directorial position.

Company Type	Non-Executive Director Remuneration	Chair Remuneration
Private Companies	$20,000-$110,000	$25,000-$250,000
Unlisted Public Companies	$45,000-$150,000	$60,000-$300,000
ASX 200 Companies	$110,000-$250,000	$220,000-$760,000
ASX 100 Companies	$275,000	$510,000 average $1,200,000 highest (BHP)

These figures represent payments for directors based on the time they spend carrying out directorial duties, as directed by the board’s remuneration policy. However, it’s important to note that these averages are indicative rather than definitive, due to the wide range of factors that can influence director remuneration.

Factors Influencing Non-executive Director Remuneration

The remuneration for Non-executive Directors in Australia hinges on several key factors, including the size and sector of the company, the scope of duties and responsibilities entrusted to them, as well as their personal experience and expertise within the industry.

Company size and industry

Big and small firms pay different amounts. A big firm on the ASX pays more than a small business. Non-executive directors in Australia earn between $23,000 in small firms and $510,000 in big ones.

The work they do also changes the pay. Some industries need more work from their board members. They tend to pay more for this extra work.

Duties and responsibilities

Non-executive directors have important jobs. They help to set the company’s pay policy. This includes how much money both directors and senior leaders get. They spend time doing work for their role as director of the company.

Non-executive directors should make sure they understand their tasks well before they start a job. The size of the business can change what these tasks are, so it is always best to discuss it first with the rest of the board members in detail.

Experience and expertise

Non-executive directors get paid for their skills and knowledge. They have to make big choices for a company. So, they need a lot of experience in business matters. Non-executive director remuneration is often tied to the level of expertise.

For instance, directors who have led large companies or sat on other boards may earn more. Some industries also pay more for certain types of experience. An expert in finance might be in high demand on an ASX board, therefore earning them a better pay.

So, your past work matters when it comes to what you earn as a non-executive director. You should aim at improving your skills and gaining new experiences continually so that you can negotiate for higher pay.

Common Trends in Non-executive Director Remuneration

In a landscape marked by heightened scrutiny, the remuneration trends for non-executive directors in Australia show clear signs of stagnation. An increasing focus on transparency is reshaping how director pay aligns with performance.

A new emphasis on diversity and inclusion is also transforming boardrooms across the country, affecting compensation schemes as businesses strive to reflect societal progress in their board composition.

Stagnation in remuneration rates

Pay for board directors in Australia has seen little growth in recent years. Directors of listed companies are paid out of a common pool, the upper limit of which is presented to shareholders at a general meeting. As there has been increasing public scrutiny and media coverage of director pay hikes in recent years, boards may be reluctant to approach shareholders for a pay increase, contributing to this stagnation.

Focus on transparency and alignment with performance

Pay for non-executive directors in ASX-listed company is usually publicly available in annual reports.

This high degree of transparency is intended to make sure that good governance work gets rewarded rightly. It is fair and it gives trust to everyone in a company and its shareholders too. All this is part of what we call transparency and alignment with performance in remuneration package for board directors.

Emphasis on diversity and inclusion

The rise of ESG investing, shareholder activism and stakeholder capitalism have helped drive companies in Australia to further value the contributions of people from different backgrounds. Increasingly they want their boards to reflect this. Non-executive directors from diverse groups add new ideas, benefiting the company and shareholders.

Tips for Negotiating Non-executive Director Remuneration

When it comes to negotiating non-executive director remuneration, knowledge is truly power. Learn how to research and compare rates, access the financial health of a company, negotiate equity or other benefits, stay flexible with offers and discuss roles before accepting them in order to get the best deals for your expertise.

Research and compare remuneration rates

Start your research on pay rates for non-executive directors. Here’s how:

1. Look at facts and figures: The remuneration of board directors depends on many things. The size and type of the company matter a lot. The fee for being a chairperson can be up to $315,000 in ASX 200 firms.
2. Understand industry standards: There are rules about how much non-executive directors can be paid in Australia. Make sure you know these rules.
3. Understand corporate governance principles such as the ASX Corporate Governance Principles available via the ASX Regulation Portal. For example, the Corporate Governance Principles recommend companies consider the following in relation to non-executive directors:
   • Non-executive directors should normally be remunerated by way of fees, in the form of cash, non-cash benefits, superannuation contributions or salary sacrifice into equity – they should not normally participate in schemes designed for the remuneration of executives.
   • Non-executive directors should not receive options or bonus payments.
   • nNon-executive directors should not be provided with retirement benefits other than superannuation.
4. Compare different roles: The average payment for small business directors is different than that of larger companies. Be aware of these differences.
5. Consider individual factors: Things like duties, skills and experience can alter the pay rate for non-executive directors.
6. Follow trends: Watch out for changes in the market that might impact director payments.
7. Stay flexible: Pay rates may change depending on the financial health of the business you’re in.
8. Certain sectors may attract additional regulation such as APRA’s rules for banking institutions.

Consider the company’s financial health

You need to look at the company’s money state. The firm should have a healthy cash flow and good profits. This means it can pay you fair wages. If the firm is not making much money, they may offer lower pays.

They might also ask you to take part of your wage in stocks or other forms of payment. It’s crucial that you check the company’s latest financial reports before agreeing on any pay deal.

You want to make sure that they can afford your services now and in the future.

Negotiate for equity or other benefits

Negotiating for equity or other benefits is an important part of director remuneration. Here are some things to think about:

• You can ask for shares in the company. This means you will own a small part of the business.
• Look into getting superannuation contributions. This helps grow your retirement savings.

Be open to offers and remain flexible

Stay open to all offers. Be ready to discuss. Don’t say no right away. You might get a good deal that way. Let’s say, a firm can’t pay you the fees you want now, but they offer shares instead.

Think about it before you turn it down. Shares might be worth a lot more in the future if the firm does well.

Also, keep an open mind when you look at roles and firms to work with. Every role is not the same, and each has its upsides and downsides.

And remember this – top bosses in Australia earn big money because they are flexible and willing to take risks.

Discuss expectations and responsibilities before accepting a role

Knowing your duties is key before you say yes to a role. You must make sure both sides agree on what the job needs from you. Ask about meeting times, extra work and how much money they will pay for this.

Look at the company’s plans too.

You should also know how they will judge your work. Will it be by the time spent on tasks? Or maybe by goals reached? Make sure you understand these things fully before saying yes to the role.

Conclusion

The pay for non-executive directors in Australia is set by the board. This money varies a lot, it depends on things like how big the company is and what job you have to do. There are rules around this from the Corporations Act and Tax Office too.

FAQs

1. What is a non-executive director’s job in Australia?

A non-executive director’s job in Australia involves supervising the management team and making crucial business decisions.

2. How much does a non-executive director get paid in Australia?

The pay of a non-executive director varies, but generally it depends on the company size, sector and responsibilities involved.

3. Are all board directors in Australia paid for their work?

Yes for public companies, all board directors, including both executive and non-executive ones are typically paid for their service to the company. Many directorships in the not-for-profit sector are unpaid, sometimes due to regulation. Directors are not entitled to payment for services unless this is provided for in the constitution of the organisation or approved in a resolution of shareholders

4. Does the board chair usually get paid more?

5. Can one be a full-time employee and a Non-Executive Director as well?

Yes, an individual can be both a full-time worker at one organisation whilst serving as a Non-Executive Director at another. In order to avoid any conflicts of interest, the other organisation cannot be a competitor or supplier/customer.

6. Any recommended further reading?

Check out our Do I need the AICD course to be a NED?, Who Needs the AICD Company Directors Course?, What is the Difference Between MAICD and GAICD? and Five Alternatives to the Company Directors Course insights.

Interested on the direction of corporate governance in Australia more generally? Read What’s Wrong with Boards.

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Source URLs

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