Australian Financial Review
April 30, 2020

Global biotech CSL can add having the country’s best value board to its list of accolades, a new study has found.

Analysis by Apollo Communications found that when board fees are compared with the company’s market capitalisation, CSL is top of the heap, followed by the board of gold miner Newcrest Mining in second place.

The most expensive boards compared with their market cap for ASX top 100 companies include Virgin Money UK, AMP, Resmed, Bank of Queensland, Link, Star Entertainment, James Hardie and Challenger, the research found.

The report found the 563 directors sitting on our top 100 company boards collectively receive more than $176 million, and certain investor groups – already angered over dilutions from capital raisings – are urging more pay restraint by boards in the wake of the crisis.

However the report concludes that compared with the $1.7 trillion in value and 3 million workers they oversee, board fees remain relatively modest, although male directors receive on average 20 per cent more than women.

“Non-executive directors are paid just 0.01 per cent annually of the market capitalisation of the ASX companies they oversee, suggesting they provide fair value for the responsibility they take on,” Apollo Communications chief executive Adam Connolly said.

Several boards, including Qantas’, have frozen their board fees or made cuts of up to 50 per cent until the end of the financial year to deal with the COVID-19 crisis, as analysis by The Australian Financial Review and OpenDirector shows CEOs have shared in more than $25 million in pay pain.

Gregory Robinson, managing partner of executive search firm Blenheim Partners, expects directors’ fees to fall in the short term but argues that, longer term, they need to rise to reflect even greater risks.

“Directors’ professional and personal exposure is high,” Mr Robinson said. “You could argue that the dangers of sitting on a board are higher as a result [of the coronavirus crisis].”

Calls to expand director pool

The report also concludes that the pool of directors may need to be expanded, as some advisers suggest that sitting on more than two large listed boards may be too many following the COVID-19 crisis.

“In some cases, individuals sit on four ASX-listed boards simultaneously, while others have served for up to 45 years on one board, when governance guidelines suggest the maximum tenure should be no more than nine years,” Mr Connolly said.

The report finds Ramsay Health Care’s chairman Michael Siddle is the country’s longest director at 45 years, five times the suggested nine-year limit, while fellow director Peter Evans is also in the top 10 longest-serving directors after 29 years.

The head of the Australian Institute of Company Directors, Angus Armour, agreed that the present crisis had “really underlined the limits to the amount any one director can take on”.

“I have always counselled directors to take on roles with the frame of mind that any one of their boards may become engulfed in a crisis,” Mr Armour said.

Mr Robinson agrees. “Some directors found themselves exposed,” he said. “Once we get through this process, I think serious consideration will be given to the view that some directors weren’t able to contribute as much as others, and so what is the appropriate number of seats to hold,” he said.

Despite CSL rising to become the ASX’s most valuable company by market capitalisation worth more than $145 billion, its board led by former CEO Brian McNamee ranked just 52nd among top 100 companies for board fees with $1.69 million.

Newcrest Mining, which ranked second in value, has a market capitalisation of more than $21 billion and ranked 16th by size but only 66th for board fees.

The next best value boards include Magellan, Coles Group, GPT, Afterpay Touch, Xero, Sydney Airport, a2 Milk and Sonic Healthcare, when board remuneration is ranked against company size.

Other findings of the report, which looked at data up until November last year, were the median age of top 100 directors is 60, and 79 year-old Goodman Group’s Ian Ferrier has replaced the 80 year-old Crown Resorts’ Geoff Dixon as the oldest director.

TPG Telecom’s Shane Teoh is the youngest at age 33 while an arts degree was the most common education among directors, compared to science degrees for CEOs.

Gordon Cairns topped the list of best paid directors, earning $1.8 million from his seats on the Woolworths, Origin Energy and Macquarie boards.

The three highest paid single board directorships are Rio Tinto’s Simon Thompson on $1.6 million, AMP’s Mike Wilkins on $1.51 million and BHP’s Ken MacKenzie on $1.33 million.

The report also found male directors earned 20 per cent on average more than their female colleagues ($263,144 versus $218,696).

“If that’s a fact, that’s disappointing,” Chief Executive Women Sue Morphet chairman said. “We have got all these talented women who should be paid the same as men.”

Article by Patrick Durkin and Sally Patten


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