Non-executive directors report 2017
Practices and remuneration trends report
Overview
We set out 10 years ago to monitor fee trends and discuss and debate appropriate boardroom practices. Over time, this quickly extended to include monitoring the profile of non-executives to discussing important issues that are being addressed in the boardroom and changing the shape of the board.
We have seen significant improvement over the past decade on issues such as independence and the mix of quality non-executives on our boards. The first edition of this report preceded King III by two years, at a time when there was a void in reporting remuneration and a lack of good corporate governance for executive remuneration. We are now at the point where King IVTM is the standard by which all organisations are expected to be governed. The future of the board will change to reflect increased business risks and it is predicted that non-executives will become specialised professionals.
Boards are under pressure to continually transform and to ensure that they have the right expertise, experience and diversity to be an effective board in this rapidly-changing business environment.
Environmental and social investing
Environmental, social and governance (ESG) goals are no longer seen as a ‘nice to have’ but are now a business imperative. Accordingly, there will be increasing pressure on business as governments introduce new regulation and policy around the globe to help them achieve the 17 global SDGs. Investors are putting pressure on companies to divulge where they stand on these issues. Companies have taken note. For example, the growth in ESG reporting by the S&P 500 companies grew from 20% in 2011 to 81% in 2015.
Shaping the board of the future
Non-executive directors of the future will consequently need to focus on commercial realities, while acting responsibly towards the company’s labour force, the community and the environment. Boards will have to be more agile and able to adapt as quickly if not faster than the speed of change in technology and the environment and in so doing, become more effective. Since 50% of the world’s population is female, the board of the future will by default move towards the same balance of gender diversity, and this is especially relevant since women globally are better educated than men.
Profile of a non-executive director
The board tenure for non-executive directors on JSE boards has shown an increase for both chairperson and NEDs this year. This is indicative of a slowdown in board resignations or changes. However, a single year change does not show a trend and leaves the linear direction still pointing south.
At 30 November 2016, the total number of non-executive directors serving on the boards of active companies on the JSE was 2 248, which is 111 directors more compared to the prior reporting period.
The report found only a third of organisations surveyed consider achieving gender diversity in leadership a priority.
Gerald Seegers
