Johannesburg - The risk associated with being a non-executive director of a JSE-listed company has grown far beyond the reward enjoyed by these independent voices which are expected to maintain order in volatile market times.
This is according to global consulting firm PricewaterhouseCoopers (PWC) following the release of its Non-Executive Directors Best Practices and Fees Report.
In terms of good corporate governance regulations, listed companies are required to have independent non-executive directors on their boards to assist with issues such as sustainability, risk and audit. The thinking behind this is to provide increased transparency and help directors make tough decisions when there may be conflicts of interest.
"The job of non-executive director is far more technical now and it's not just old people filling spaces on boards," said David Yzelle, the researcher for the PWC survey. He added that they "carry the can" just like the executive directors, should issues at the company go pear-shaped.
"Doing the right thing in 2009 will be tough for non-executives," said Gerald Seegers, a partner at PWC.
The tumble in global equity markets in 2008 has prompted many shareholders to question the role of directors in listed companies, the value they add and whether they are being fairly remunerated.
Already questions have been asked at companies like Gold Reef Resorts, Bidvest, Peregrine and JD Group around the performances of non-executive directors or the independence of decisions taken by executives.
With share prices taking a beating over the last six months, shareholders have taken a more militant attitude to those appointed to run their businesses.
At the recent Bidvest annual general meeting, CEO Brian Joffe was expected to field some tough questions about a wayward non-executive director.
Last year, Gold Reef found a questionable remuneration package scuppered as shareholders voiced their displeasure and pressured management to backtrack.
Underpaid and under-appreciated
A key point up for debate is the remuneration of non-executive directors.
Seegers said: "Do we pay non-executive directors enough? The short answer is 'No'."
According to the survey, non-executive directors in small-cap businesses (defined as companies with a market capitalisation of less than R1bn) earned R109 000.
Non-executive chairpeople could command about R862 000 per year while non-executive directors at the top end of the bracket earned about R352 000.
PWC indicated that in 2008, the number of non-executive directors in SA had been on the up. This has been attributed to a number of black economic empowerment deals. Mining (358 non-execs), industrial goods and services (285) and financial services (255) made up the three biggest employers of non-executive directors in SA.
Seegers said he expects remuneration of directors and chairpeople to be a hotly debated topic in 2009, especially with quality board members proving hard to find.
Subjects like share options and directors converting share options into highly geared futures plays are all likely to come up for debate.
Seegers and his team believe that more transparent, ordinary shares - paying dividends to directors - may be a better way for directors to be remunerated for their services.
Seegers said: "Sitting on a remuneration committee will be very tough in 2009."
- Fin24.com