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Directors deserve a pay rise: Tomlinson

NON-executive directors need a pay rise, says former National Mutual group managing director Geoff Tomlinson.

He believes the role of non-executive directors deserves more recognition and better remuneration.

Mr Tomlinson made the call at a recent Australian Institute of Company Directors function in Perth.

Mr Tomlinson, who sits on nine boards, said he knew the sort of hours involved and the increasing liability faced by directors and believed they deserved more pay – including share options.

His comments come after a spate of million-dollar ‘golden handshakes’ recently paid to CEOs attracted the attention of shareholders and media and opened debate on the issue.

The $13.2 million paid to former AMP CEO George Trumbull, $11.1 million to former BHP CEO John Prescott and $9.3 million to National Australia Bank CEO Don Argus has dented the reputation of directors in general.

A survey by Board and Executive Search Consultants PRO:NED shows the total commitment, including all regular and ad hoc meetings, committee work, site visits and travel, averages thirty-six days per annum for chairmen, thirty-four days for deputy chairmen and twenty-seven days for non-executive directors.

The base fee averages $50,829 for chairmen, $40,188 for deputy chairmen and only $26,832 for non-executive directors.

The survey of 300 directors found that, on average, the chairmen receives one-fifth of the CEO’s remuneration of more than $250,000.

AICD WA councillor and Catalyst Consulting Services director Mike Horabin said directors were probably not paid enough for what they did.

He said to make an increase in directors’ remuneration more acceptable, general shareholders shown the demands in terms of time and liability the position required.

Mr Horabin said businesses performing well usually had no problem with rewarding the directors, however it was when a company performed poorly that the issue arose with regard to pay rises.

He said most directors did not take on the job for the money as the remuneration did not provide adequate compensation for when things went wrong in the company.

Democrats Senator Andrew Murray also entered the debate, calling for corporate governance reforms.

Under amendments he proposed, public companies would be required to ask shareholders to vote on creating a corporate governance board to determine directors’ remuneration.

“I am not necessarily suggesting the remuneration packages of Australia’s most senior executives are unjustifiably high but I am saying the manner in which those packages are determined and approved leaves them open to attack,” Senator Murray said in Federal Parliament recently.

However, Mr Horabin said public companies were already making use of remuneration boards and increasing the auditing processes and transparency of companies.

“I think the corporate governance model in Australia is as good as any where in the world,” he said.

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