Hallenstein Glasson directors fees boosted on high benchmark

Monday, 18 December 2017

Directors on Hallenstein Glasson will enjoy a substantial fee increase.

Companies are continuing to rely on benchmarking studies to set director fees even though the Shareholders Association says they are flawed and ratchet fees upwards.

Christchurch-based Hallenstein Glasson recently increased its pool of fees for six directors from $410,000 a year to $585,000 after they were unchanged for five years.

But Michael Hawkins, chairman of the Shareholders Association, said it was an obvious potential conflict of interest to use a report from Institute of Directors to justify the rises.

The report recommended the Hallenstein Glasson chairperson receive $144,000 to $162,000 a year, and other directors $80,000 to $90,000, with an extra $10,000 for the chairperson of the audit committee and $5000 for chairing various other committees.

* NZ directors' fees unfair compared with international standards: IOD**

'When you benchmark, it typically results in the conclusion that a rise is justified and that raises the baseline for the next benchmark report. It results in an upward spiral,' Hawkins said.

The Hallenstein Glasson board settled on $135,000 for the chairman, and $80,000 for directors with the recommended extra top ups for chairing committees.

The Shareholders Association had reservations about the Institute of Directors comparison with the Kathmandu board remuneration of $126,000 for directors and $241,553 for the chairman.

The Kathmandu figures were above the range of average directors' fees, based on the institute's own survey of listed companies, which showed an upper quartile range of $80,000 to $100,000 for directors, and $140,000 to $170,000 for the chair position. The average for listed companies was $77,700 to $79,700 for directors.

Based on turnover, Kathmandu is twice as big as Hallenstein Glasson, although the sector has similar challenges.

Hawkins said the comparison should have been with companies like Abano or Steel & Tube which had directors fees of $65,000 and $75,000 respectively.

But in the end, the Shareholders Association supported the Hallenstein Glasson pool fee rise because of its solid performance in a difficult sector, and the pressing need to refresh the board.

'We accept that some movement was necessary. Retailing is seen as a higher risk area, and quality directors will want some margin for that.

'But we will be urging the directors to moderate the individual director figure. We have no issue with the larger chairman increase as this has significantly lagged the market for some time,' Hawkins said.

Hawkins said benchmarking reports were often done by consultants employed by companies and therefore they didn't want to rock the boat.

There were increasing signs that boards of directors were more concerned about the difference in pay between executives and other staff, he said.

'Larger jumps maybe the result of specific cases and many companies will talk to us about it which shows they want to do the right thing.

'We expect the Hallenstein Glasson board board will take note of our comments and those of some institutional shareholders who also had reservations at the proposed level,' Hawkins said.

Institute of Directors representatives were unavailable to comment.

Hawkins said the difference between worker pay and executive and directors remuneration was still far less than the disparity in other countries including the UK and US.