The 2010 Board of Directors Study, Australia and New Zealand

2010 Board of Directors Study Australia and New Zealand

Š 2010 Korn/Ferry International

Contents Table of contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 About Korn/Ferry International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 About Egan Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Editorial comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Information and interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Non Executive Chairmen and Non Executive Directors fees . . . . . . . . . . 11 Australia Board demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Australia Board committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Australia Non Executive Chairmen and Non Executive Directors fees . . . . . . . . . . 22 New Zealand Board demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 New Zealand Board committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 New Zealand

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About Korn/Ferry International Since our founding in 1969, Korn/Ferry International has been the executive recruitment industry’s leader and innovator, and today has evolved as the world’s premier provider of talent management solutions.

More companies around the world trust Korn/Ferry than any other firm to deliver and develop the best executives to run their organisations, a responsibility we take seriously and work every day to meet with integrity and results.

Our executive recruitment professionals conduct more than 10,000 senior-level searches for clients worldwide each year. From our nearly 80 offices in 40 countries, we ensure that our clients have access to the most qualified candidates for every position.

With the business community now facing many more challenges in attracting, developing and retaining talent, Korn/Ferry’s services also include a full suite of leadership and talent consulting offerings, as well as talent acquisition solutions.

Korn/Ferry International’s Global Board & CEO Services team has embraced this change driving the appointments of hundreds of new directors while utilising our Chief Executive Institute.

Developing world-class organisations is an ongoing process, and crucial to maintaining an organisation’s competitive advantage. Korn/Ferry’s Leadership and Talent Consulting business goes beyond executive search by delivering sophisticated talent and organisational strategies to optimise performance including succession planning.

Level 20, 60 Castlereagh Street Sydney NSW 2000 Australia Telephone +612 9006 3400 Facsimile +612 9006 3600

Level 43, 120 Collins Street Melbourne VIC 3000 Australia Telephone +613 9631 0300 Facsimile +613 9650 9161

Level 5, 1 Woodward Street Wellington New Zealand Telephone +644 460 4900 Facsimile +644 460 4901

Level 2, 14 Viaduct Harbour Ave Auckland New Zealand Telephone +649 309 4900 Facsimile +649 309 4904

For more information, call Robert Webster, Senior Client Partner and Head of the Australasian Board Services Practice, on +612 9006 3444 or Suzanne Williams, Senior Client Partner, Australasian Board Services Practice, on +612 9006 3428 or visit www.kornferry.com.

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About Egan Associates Egan Associates provides advice in Australia and New Zealand to boards and chief executives of leading organisations, to mid market and entrepreneurial enterprises across all sectors and to government.

John Egan has provided advice to some of the largest organisations in the region since 1975. John Egan and the firm’s principals have well developed long term affiliations with leaders within both the public and private sectors.

Egan Associates maintains a comprehensive Director and Senior Executive remuneration database for Australia and New Zealand and draws on international resources where necessary. Our clients extend across the complete breadth of the market from leading public companies, those preparing for listing, private and international corporations, government and related corporatised entities, as well as innovative enterprises.

Egan Associates acts as an independent adviser to boards and additionally provides advisory services to an extensive range of companies on Non Executive Directors’ emoluments, CEO and Executive reward, including both annual and long term incentive programs. Increasingly, Egan Associates is engaged in the provision of advice on strategic and corporate governance issues, preparation of explanatory notes for annual general meetings and company remuneration reports for shareholder review, as well as attesting to the reasonableness of CEO and Executive Director reward arrangements.

Details of our services can be reviewed on the company’s website.

Level 16, 6 O’Connell Street Sydney NSW 2000 Australia Telephone: +612 9225 3225 Facsimile: +612 9225 3235

GPO Box 4130 Sydney NSW 2001 Australia

For more information, visit Egan Associates’ website www.eganassociates.com.au or call John Egan or Lianne Hooper on +612 9225 3225.

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Preface This year we have focused on the continuing challenge for boards of CEO succession planning and we outline the leading role Korn/Ferry International has taken globally in providing our clients with the expertise to assess and develop their internal talent.

The enhanced role and responsibility of board remuneration committees under new ASX listing rules is a major topic of discussion, particularly as some boards have come under real pressure to substantiate and justify their Remuneration Reports at annual meetings.

The size of boards, the selection of NEDs, and the role played by the board nomination committee, particularly in relation to gender diversity, is also discussed.

Korn/Ferry International and Egan Associates are pleased to collaborate on these important issues and to bring our collective expertise together for the benefit of our clients.

Our 2010 Board of Directors Study has been published following another year of progress and changes in our boardrooms.

We trust that you and your board will find it stimulating and helpful in your deliberations on these important issues.

Gary Reidy Managing Director, Australasia Korn/Ferry International

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John Egan Chairman Egan Associates

Introduction CEO and leadership succession continues to be a hot topic around the boardrooms of corporate Australia according to a survey conducted by Korn/Ferry International where almost 80 percent of respondents felt that succession was a leading concern for their organisations. The nature of this concern was expressed in various terms:

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inability to keep successors engaged and in the pipeline inability to accurately anticipate (or manage) the timing of succession specific skills shortage in senior leaders, notably a lack of deep and broad operational experience an acknowledgement that the CEO role is getting harder and that preparing people for the unique demands of this role is increasingly challenging

Yet despite the gravity of these concerns and their impact on the sustainability of business performance, almost one third of respondents believed that the level of board oversight of the succession process was “somewhat poor”.

The reality in many organisations is that succession is still treated as an event and not a process. While one respondent insightfully noted that “It’s the hardest game of chess you will ever play”, it appears that too many boards fail to appreciate that succession is not merely a transaction, rather it is a systemic organisational change that is deeply rooted in strategy, vision and culture and necessarily impacts every talent management process within the business. The consequence for organisations that are more reactionary in their response to succession and unplanned vacancy issues is that they are likely to be limited in choice for top executive talent and as a result place long term shareholder value at risk.

There are, of course, many examples of sound succession practices.

So what are we observing in the organisations that are getting succession right?

A succession mindset is inculcated and linked to strategy. Those organisations that are able to identify the key leadership capabilities that they need in order to achieve their organisational strategy and orientate their leadership development investment around these capabilities are better placed to achieve stronger talent pipelines. Too often we see the opposite, where organisations continue to invest heavily in leadership development initiatives that are not anchored in the strategic imperatives of the business and are therefore not critical to future success.

Good succession planning is a key component of risk management.

Boards who appreciate the direct correlation between external stakeholder and investor confidence and the perceived depth of succession elevate the importance of systemic succession management.

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Succession management is data driven. There is an art and science to good succession planning. The robust assessment of executive talent including the objective evaluation of both performance and potential injects a necessary degree of rigour in what is too often an arbitrary process reliant upon subjective judgments founded in observation of past performance.

Identify the critical career experiences that develop leadership competency. Preparation for mission critical roles requires exposure to foundational career experiences. Organisations that identify and prioritise key assignments and roles for future leaders maximise stretch opportunities and the ability to build strategically relevant leadership competency.

Identify true high potential early. Research proves that almost 30 percent of “high performers” are not in fact “high potential”. Strong future leaders are highly “learning agile” and by identifying and measuring those factors that are linked with success in new and challenging situations, organisations are able to identify high potential talent with confidence. Data from our recent survey revealed that almost one quarter of respondent organisations did not have a systematic way of identifying high potential executives.

Develop leaders from the “inside out”. Cutting edge leadership development goes beyond technical and managerial content to focus on the personal, interpersonal and organisational context. These attributes are typically in short supply because they are not easy to acquire and take time to refine. Development initiatives deal with the whole person and must be high touch, high impact and custom designed to address:

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leading self and the demonstration of personal flexibility leading others – getting work done through others and command skills leading the organisation – inspiring others, driving change and enabling innovation.

Korn/Ferry International’s Leadership and Talent Consulting practice is dedicated to working with Boards on a range of succession management issues, including the alignment of succession planning processes to organisational strategy, early identification of high potential, the objective assessment of individuals utilising research validated and externally benchmarked instruments and the custom design of high impact leadership development programs.

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Editorial comment Challenges of boards and board remuneration committees With the impact of the global financial crisis still being felt, many companies did not adjust board fees in 2009 even where they had capacity within pre approved fee pools. In 2010 however many boards have found it prudent to make fee adjustments either because they held back in 2009 or because they believed a modest increase would be more palatable now than a larger catch up increase in the future. On average the increase in Chairman fees over 2010 has been around 1.8 percent and for Non Executive Director fees, 3.9 percent.

During the last 12 months Directors have received various signals which highlight the increased stringency in governance and corporate regulation of remuneration in particular arising from the G20 responses to the global financial crisis. In Australia and New Zealand, those signals have been reinforced by particular initiatives taken by the ASX and NZSX in response to global regulatory and legislative changes; changes to Listing Rules relating to trading windows and the independence of remuneration committees being two examples in the Australian market.

While boards are dealing with the financial crisis and its impact on bottom lines and shareholder value, a real hot spot in the committee room has become the role of Chairman of the remuneration committee.

The role and independence of this committee continues to grow with increased scrutiny and shareholder input. Whilst neither Australia nor New Zealand has had to appoint a pay czar (as in the US) and their financial institutions have demonstrated considerable strength by global standards (and therefore avoided much of the impact of additional regulatory control), the level of examination of remuneration issues has taken on a forensic character as distinct from an historical light touch.

While boards might not be meeting more often, except in circumstances where they have had to address capital restructuring or debt refinancing, we have observed that the frequency of meetings and/or time commitment of many committees have increased. This is particularly the case for risk management and remuneration committees. The latter is in response to both government initiated enquiries and increasingly negative votes in respect of company remuneration reports, often sponsored by proxy advisors.

With new ASX listing rules coming into force from July 2011, requiring all Top 300 Listed Entities in Australia to have a remuneration committee comprised solely of Non Executive Directors, we will see even more attention being given to the makeup of remuneration committees and to their decisions.

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Changes in the structure of boards There is also much discussion about the need to separate the nomination and remuneration committees of a board with more focused attention being given to board renewal. Nomination committees are increasingly addressing the key issues of board effectiveness, such as the suitability of current board members, the issues of board diversity (the gender factor) and the breadth of skills required of Directors as more Australian and New Zealand companies expand their businesses offshore.

While there has been an observable trend over the last 12 months for smaller companies to increase the proportion of Non Executive Directors, there have been significant shifts in the composition of boards in two sectors which were lagging behind others in terms of board size and the proportion of Non Executive Directors. The IT sector which previously had the lowest proportion of Non Executive Directors, 62.5 percent in 2009, increased its proportion of Non Executive Directors to 72 percent in 2010, while companies in the telecommunications sector also increased their proportion of Non Executive Directors in one year from 73.3 percent to 80 percent.

The other trend we have observed is a move away from large boards to a more manageable size of between six and nine Directors. 48 percent of ASX Top 50 Companies now have between eight and nine Directors, up from 36 percent in 2009.

The ASX has also placed an additional requirement on boards to address the issue of diversity of board structures by virtue of their Corporate Governance Principles and Recommendations. The Recommendations require boards to establish a policy concerning gender diversity and to disclose that policy by 2011. The policy should include the requirement for the board to establish measurable objectives for achieving gender diversity and for the board to annually assess both the actual objectives and progress towards achieving them. Boards will be required to disclose the proportion of women employees in the organisation, the proportion of women in senior executive roles and the number of women on boards.

The 2010 data shows the continued domination of males in both Chairman and Non Executive Director roles and whilst the recent Australian hurdle of ten percent of Non Executive Director roles being held by women was heralded as significant, it really only highlights the distance to go in achieving the gender representation being proposed in both Australia and New Zealand.

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Information and interpretation This 2010 Study has been compiled by Egan Associates from an analysis of published information from annual reports (through to end of 2009) of leading companies in Australia and New Zealand.

Information and interpretation The number of Australian companies included in this Study is 300 while the number of New Zealand companies is 50.

For this 2010 Study the revenue ranges and market capitalisation ranges for Australian and New Zealand companies continue to reflect those adopted in prior years, though the constituents in these groups of companies will vary in accordance with individual corporate circumstances, as will the constituents in ranked companies.

Revenue and market capitalisation ranges (Australia and New Zealand) 2010

Greater than $10 billion $5 - $10 billion $2 - $5 billion $500 million - $2 billion $200 - $500 million Less than $200 million Revenue and market capitalisation ranks (Australia) 2010

Of the Top 300 companies: Top 50 Second 50 Top 100 Top 100 - 200 Top 200 - 300 Revenue and market capitalisation ranks (New Zealand) 2010

Of the Top 50 companies: Top 10 Top 10 - 25 Top 25 - 50 The fees analysis includes base or retainer fees, committee fees and disclosed contributions to Directors’ retirement, including mandatory contributions under the Australian Superannuation Guarantee legislation. In the aggregate fees we also incorporate voluntary or mandatory setting aside of fees for the purpose of acquiring shares in a company, though exclude disclosed retirement benefit accruals.

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While data is based on that reported in respect of financial years ending 31 December 2009, the market capitalisation ranking adopted in this Study has been determined as at 30 June 2010 with a 22-day smoothing applied.

Profile of participating organisations The list of 350 organisations, Top 300 Australian companies and Top 50 New Zealand companies from which data has been drawn, is appended.

The analysis is restricted to the Top 300 Australian and Top 50 New Zealand companies by market capitalisation as at 30 June 2010 with 22-day smoothing applied, and excludes property trusts, funds, overseasbased companies and subsidiaries.

Table 1

Profile of Australia leading companies Australian leading companies

2010 average A$

Count #

Market capitalisation*: Top 300 Companies

3,804,214,238

300

3,235,890,596

18%

Market capitalisation: Top 50 Companies

18,140,891,600

50

15,660,862,540

16%

Operating revenue: Top 300 Companies

2,724,442,600

300

2,722,993,747

0%

Operating revenue: Top 50 Companies

12,235,485,250

50

11,975,151,220

2%

Total assets: Top 300 Companies

12,505,043,923

300

11,708,010,535

7%

Total assets: Top 50 Companies

67,466,617,155

50

61,998,204,732

9%

271,330,197

300

309,995,501

-12%

1,460,708,826

50

1,594,268,192

-8%

Operating profit: Top 300 Companies Operating profit: Top 50 Companies

2009 average % A$ Change

* Market capitalisation as at 30 June 2010 and 30 June 2009 respectively

Table 2

Profile of New Zealand leading companies New Zealand leading companies

2010 Average NZ$

Count #

2009 Average % NZ$ Change

Market capitalisation*: Top 50 Companies

792,170,250

50

769,965,659

3%

Operating revenue: Top 50 Companies

843,516,920

50

830,627,040

2%

Total assets: Top 50 Companies

1,290,873,320

50

1,281,375,140

1%

Operating profit: Top 50 Companies

31,862,775

50

90,999,060

-65%

* Market capitalisation as at 30 June 2010 and 30 June 2009 respectively

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Australia: Non Executive Chairmen and Non Executive Directors’ fees Australian leading companies ranked by revenue Non Executive Chairmen’s fees have been analysed according to company size, that is by revenue and market capitalisation.

Of the Top 300 Australian companies, we have been able to include 221 Non Executive Chairmen (we exclude overseas-based incumbents, executive Chairmen and those incumbents who only served a part year).

Table 3 reveals that the average fee payable to a Chairman in the Top 300 Australian companies stood at $241,687, at the median $174,000 and at the 75th percentile $326,000.

Non Executive Directors’ fees among the same organisations on average stood at $124,985, at the median $102,500 and at the 75th percentile $158,642.

The average fee payable to a Non Executive Chairman varied according to organisation scale. Among those companies with revenues of less than $200 million the Chairman’s fee on average stood at $119,892, whereas among companies with revenues greater than $10 billion the average fee was $666,663. The median Chairman fees among the smallest companies stood at $107,506, whereas among the largest in revenue terms stood at $611,738. At the 75th percentile the variance was from $150,000 to $742,000.

In grouping companies within revenue clusters, taking the Top 50, Second 50, Top 100, then those companies ranked in revenue terms between the Top 100 and 200 and the Top 200 and 300 reveals similar dispersion in relation to fees payable to Chairmen and Non Executive Directors. The highest paid Non Executive Directors, including Chairmen, are in companies with the most substantial revenues and the least well paid being in those organisations ranked below the ASX Top 200.

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Table 3

Non Executive Chairmen and Non Executive Directors’ fees in Australian leading companies by revenue

Top 300 Companies by revenue Average Median

A$ A$

75th percentile A$

25th percentile A$

Sample #

Total sample Chairman

241,687

174,000

326,000

117,500

221

Non Executive Director

124,985

102,500

158,642

72,540

1,017

Revenue ranges greater than $10 billion

Chairman

666,663

611,738

742,000

583,762

15

Non Executive Director

267,177

275,930

312,374

232,937

87

Chairman

452,293

435,000

508,000

400,000

13

Non Executive Director

194,312

189,800

228,900

153,000

57

Chairman

332,327

348,038

395,757

265,934

30

Non Executive Director

151,599

143,900

185,000

122,171

153

Revenue ranges $5 - $10 billion

Revenue ranges $2 - $5 billion

Revenue ranges $500 million - $2 billion

Chairman

246,170

217,066

304,500

164,500

51

Non Executive Director

122,890

114,450

146,857

87,000

257

Revenue ranges $200 million - $500 million

Chairman

163,799

152,920

191,676

137,950

36

Non Executive Director

93,890

87,500

103,834

75,300

177

Revenue ranges Less than $200 million

Chairman

119,892

107,506

150,000

75,975

76

Non Executive Director

70,225

63,260

84,992

50,000

286

Revenue ranked Top 50 Companies

Chairman

482,468

447,445

601,000

346,075

45

Non Executive Director

216,662

203,163

268,526

152,939

227

Revenue Ranked Second Top 50 Companies Chairman

274,168

257,904

361,736

181,688

38

Non Executive Director

129,980

121,892

163,938

95,000

194

Revenue ranked Top 100 Companies

Chairman

387,101

360,690

472,087

247,359

83

Non Executive Director

176,718

160,410

216,675

120,000

421

Revenue ranked Top 100 - 200 Companies Chairman

192,554

162,913

217,050

140,218

70

Non Executive Director

103,164

91,151

114,905

76,763

343

Revenue Ranked Top 200 - 300 Companies Chairman

114,773

104,271

143,097

74,000

68

Non Executive Director

68,484

61,720

82,182

48,142

253

NB: Non Executive Director exclude Chairmen

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Australian leading companies by market capitalisation Australia’s largest companies by market capitalisation (Table 4) reveal an average Chairman’s fee of $633,163, at the median $611,738 and at the 75th percentile $713,899. For those companies with a market capitalisation between $200 and $500 million the average Chairman’s fee stood at $127,396, at the median $115,723 and at the 75th percentile $153,060. Among the Top 50 the average chairman’s fee stood at $519,306, at the median $478,158 and at the 75th percentile $611,738.

Among the Top 200 to Top 300 companies the average chairman’s fee stood at $132,619, at the median $119,950 and at the 75th percentile $153,989.

For Non Executive Directors the average fee for a Director serving on a company with a market capitalisation in excess of $10 billion stood at $267,177, at the median $261,506 and at the 75th percentile $302,010.

For those Directors serving on boards of companies with a market capitalisation between $200 and $500 million the average fee was $77,251, at the median $71,346 and at the 75th percentile $91,388.

In the most populous group, that is those with a market capitalisation between $500 million and $2 billion, the average Director’s fee stood at $100,660, at the median $96,578 and at the 75th percentile $120,000.

Among the Top 50 the average Director’s fee stood at $226,955, at the median $212,887 and at the 75th percentile $271,420. Among the Top 200 and Top 300 companies the average Director’s fee was $78,421, at the median $73,981 and at the 75th percentile $93,075.

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Table 4

Non Executive Chairmen and Non Executive Directors’ fees in Australian leading companies by market capitalisation

Top 300 Companies Average Median by market capitalisation A$ A$

75th percentile A$

25th percentile A$

Sample #

Total sample Chairman

241,687

174,000

326,000

117,500

221

Non Executive Director

124,985

102,500

158,642

72,540

1,017

Market capitalisation ranges greater than $10 billion Chairman

633,163

611,738

713,899

480,742

17

Non Executive Director

267,177

261,506

302,010

215,691

100

Market capitalisation ranges $5 - $10 billion Chairman

491,678

480,700

583,762

409,062

11

Non Executive Director

200,902

189,900

229,359

169,354

70

Chairman

316,642

343,463

414,637

191,500

40

Non Executive Director

148,334

144,334

185,536

111,078

184

Market capitalisation ranges $2 - $5 billion

Market capitalisation ranges $500 million - $2 billion Chairman

197,030

190,000

235,000

147,437

73

Non Executive Director

100,660

96,578

120,000

77,672

334

Chairman

127,396

115,723

153,060

84,530

80

Non Executive Director

77,251

71,346

91,388

57,008

329

Market capitalisation ranges $200 - $500 million

Market capitalisation ranked Top 50 Companies

Chairman

519,306

478,158

611,738

420,000

41

Non Executive Director

226,955

212,887

271,420

181,387

222

Market capitalisation ranked second Top 50 Companies

Chairman

265,524

262,418

347,519

172,256

38

Non Executive Director

123,910

123,698

147,900

90,844

196

Market capitalisation ranked Top 100 Companies

Chairman

397,234

369,008

480,721

248,288

79

Non Executive Director

178,637

169,674

220,659

117,175

418

Market capitalisation ranked Top 100 -200 Companies Chairman Non Executive Director

175,854

162,913

219,338

109,250

74

95,717

90,072

116,863

71,375

316

Market capitalisation ranked Top 200 -300 Companies

Chairman

132,619

119,950

153,989

86,872

68

Non Executive Director

78,421

73,981

93,075

58,043

283

NB: Non Executive Directors exclude Chairmen

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0

0

0

0

0

Australia: Board demographics Board composition - Executive v Non Executive Directors The 2010 Study demonstrates the continued prevalence of Non Executive Directors serving on the boards of Australia’s leading companies.

Chart 1 shows that the composition of the board for the Total Top 300 Sample is 77 percent Non Executive Directors and 23 percent Executive Executive directors Non-executive directors Directors and the Top 50 sample shows that the boards comprise 50 percent Executive Directors.

82 percent Non Executive Directors and 18

The ability to become a strategic partner to Chart 2 shows that the proportion of Non40Executive Directors is the CEO and develop 84 percent for companies with revenue greater than $10 billion and in-depth knowledge 30 than $200 million. Inof the business is not 71 percent for companies with revenue less simply desireable but general terms, larger companies are more likely to have a greater mandatory for success proportion of Non Executive Directors on20 their boards. as a CFO.

10 When analysed by GICS Sector (Chart 3), Utilities companies have the highest proportion of Non Executive Directors (89 percent) whereas 0 ASX top 300 ASX top 50has the lowest proportion Information Technology of Non Executive Directors serving on their boards (72 percent).

Chart 1

Proportion of Directors for Top 300 and Top 50 100% 82%

77%

23%

0%

Top 300

Executive Directors Non Executive Directors

18%

Top 50

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in-depth knowledge of the business is not simply desireable but mandatory for success as a CFO.

$500 m-$2 bn $200-$500 m <$200m

Consumer discretionary

Non executive directors

Consumer staple Chart 2

Executive directors

Proportion of directors by revenue Energy Financials

>$10 bn Health care $5-$10 bn Industrials $2-$5 bntech Info $500 m-$2 bn Materials Telecoms $200-$500 m

16%

Non Executive Directors

84% 18%

Executive Directors The ability to become a strategic partner to the CEO and develop in-depth knowledge of the business is not simply desireable but mandatory for success as a CFO.

82% 21% 79% 19% 81% 21% 79% 29%

Utilities <$200m

71%

0%

100%

Chart 3

Proportion of directors by GICS sector Consumer discretionary Consumer staple

23% 77% 19%

73% 82% 23%

77% 28%

Info tech

26%

Materials

72% 74%

20%

Telecoms

16

77%

23%

Industrials

0%

Executive Directors

18%

Health care

Utilities

81%

27%

Energy Financials

Non Executive Directors

80% 11% 89% 100%

Distribution of board size â&#x20AC;&#x201C; all Directors (Executive and Non Executive) Board size is analysed according to Revenue and then by GICS sector, adopting the following seven categories: > > > > > > >

less than four Directors; four to five; six to seven; eight to nine; ten to 11; 12 to 13; greater than 13.

Table 5 shows the number of Directors serving on the boards of the Top 300 companies and those for the Top 50 companies ranked by Revenue.

Further analysis is provided on companies by industry sector.

Most (89 percent) of the Total Sample have between four and nine Directors and eight percent have boards with ten or more Directors.

Only three percent of the total sample have fewer than four Directors, all of which are on boards of companies with less than $500 million in annual revenue.

Among the Top 50 ASX listed companies only one board has less than six Directors and 88 percent have between six and 11 Directors, with ten percent having more than 11 Directors.

Indicatively, if revenue is a guide to company scale, larger companies have greater numbers of Directors than do smaller companies. As the data indicates, 84 percent of companies with revenues of less than $200 million have seven or fewer Directors, 78 percent of companies with revenues between $200 million and $500 million have seven or fewer Directors, whereas no board of companies over $10 billion has less than seven Directors. All but four companies over $5 billion have at least eight Directors.

The industry sector data contains companies of varying size within each GICS category. Variations in the data are partly impacted by sample size. 84 percent of Consumer Staple boards have between six and nine Directors, but only 48 percent of Energy boards have between six and nine Directors. Information Technology boards are increasing in size, 54 percent have between six and nine Directors, with 45 percent still having four to five Directors.

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Table 5

Distribution of board sizeâ&#x20AC;&#x201D;all Directors (including Chairman, Executive and Non Executive)

< 4 Directors

4 - 5 Directors

6 - 7 Directors

8 - 9 Directors

10 - 11 Directors

12 - 13 Directors

> 13 Directors

# %

# %

# %

# %

# %

# %

# %

#

Top 300 Companies

9 3%

80 27%

122 41%

64 21%

19 6%

3 1%

3 1%

300

Top 50 Companies

0 0%

1 2%

8 16%

24 48%

12 24%

2 4%

3 6%

50

0 0%

0 0%

0 0%

7 37%

8 42%

1 5%

3 16%

19

Sample

Revenue ranges Greater than $10 billion $5 - $10 billion

0 0%

1 8%

3 23%

5 38%

4 31%

0 0%

0 0%

13

$2 - $5 billion

0 0%

1 3%

12 34%

16 46%

5 14%

1 3%

0 0%

35

$500 million - $2 billion

0 0%

7 10%

40 60%

19 28%

1 2%

0 0%

0 0%

67

$200 - $500 million

1 2%

15 28%

26 48%

10 18%

1 2%

1 2%

0 0%

54

Less than $200 million

8 7%

56 50%

41 37%

7 6%

0 0%

0 0%

0 0%

112

Consumer discretionary

0 0%

10 24%

17 41%

10 24%

3 7%

1 2%

0 0%

41

Consumer staple

0 0%

1 8%

5 42%

5 42%

1 8%

0 0%

0 0%

12

GICS sector

Energy

2 7%

12 41%

9 31%

5 17%

1 3%

0 0%

0 0%

29

Financials

3 6%

7 13%

18 33%

16 30%

8 15%

2 4%

0 0%

54

Health Care

0 0%

5 28%

11 61%

2 11%

0 0%

0 0%

0 0%

18

Industrials

1 2%

8 16%

26 52%

13 26%

1 2%

0 0%

1 2%

50

Information technology

0 0%

5 45%

4 36%

2 18%

0 0%

0 0%

0 0%

11

Materials

3 4%

30 42%

27 38%

6 8%

4 6%

0 0%

2 3%

72

Telecommunication services 0 0%

1 20%

2 40%

1 20%

1 20%

0 0%

0 0%

5

Utilities

1 13%

3 38%

4 50%

0 0%

0 0%

0 0%

8

18

0 0%

100

Male

The ability to become a strategic partner to the CEO and develop in-depth knowledge 60 of the business is not simply desireable but Board composition by gender â&#x20AC;&#x201C; Non Executive Directors 40 mandatory for success Charts 4 and 5 highlight the fact that males hold the overwhelming as a CFO. 80

Female

majority of non executive director positions on leading company boards.

20 The data also reveals that 97.7 percent of non executive chairmen across 0 our entire sample are males. This is also reflected in the Top 50 Non executive directors Non executive chairman companies. For director roles, within our total sample females occupied 9.6 percent of board positions, though among the Top 50 companies, 16.3 percent of non executive directors were female.

Chart 4

Board composition by gender for Top 300 100 97.7%

100%

90.4%

80

Male Male Female Female

60 40

The ability to become a strategic partner to the CEO and develop in-depth knowledge of the business is not simply desireable but mandatory for success as a CFO.

20 0 0%

9.6% Non executive directors

Non2.3% executive chairman

Non Executive Directors Non Executive Chairmen

Chart 5

Board composition by gender for Top 50 95.8%

100% 83.7%

Male Female

16.3% 4.2% 0%

Non Executive Directors Non Executive Chairmen

19

Board comparison by age â&#x20AC;&#x201C; Non Executive Directors and Chairmen It should be noted that not all Directors in the sample disclosed their age.

Where Directors ages were disclosed the average age stood at 60 years and at the median 61 years (Table 6).

Among those companies with revenues greater than $10 billion, the average age of Non Executive Directors is 61 years and the median age is 62 years. Those companies with revenues less than $500 million have an average Non Executive Director age of 58 years and a median of 59 years.

Table 6

Age of Chairmen and Non Executive Directors in Australian Top 300 Companies

Top 300 Companies Average Median Total sample Revenue ranges

20

75th percentile

25th Sample percentile #

60

61

65

55

1,285

Greater than $10 billion

61

62

65

56

159

$5 - $10 billion

62

63

66

58

87

$2 - $5 billion

60

61

65

57

194

$500 million - $2 billion

61

61

66

56

303

$200 - $500 million

58

59

64

54

217

Less than $200 million

58

59

65

53

325

Australia: Board committees Committees have been grouped according to similarity of function. Our analysis shows that companies use a variety of titles for committees as noted in Table 7.

“Other” includes Review; Conduct; Industry Specific; Marketing; Management; Planning; Strategy; Special Board Meetings; Merger/ Acquisition; Resources and Restructure committees, as well as infrequently occurring committees such as Donations and Conduct.

For the Total Sample 27 percent have an “Other” committee and for the Top 50, 64 percent.

Distribution of committee types Table 7 shows that 97 percent of the Top 300 and 100 percent of the Top 50 have an Audit Committee, and 89 percent of the Top 300 and 100 percent of the Top 50 have a Remuneration Committee. With regard to Nomination committees, 30 percent of the Top 300 and 64 percent of the Top 50 have this committee.

Table 7

Distribution of core committees in Australian leading companies Committee

Top 300

Top 300

Top 50

Top 50

#

%

#

%

290

97%

50

100%

Compliance 2

11

4%

5

10%

Corporate governance

15

5%

4

8%

Nominations

89

30%

32

64%

Occupational health & safety 4

45

15%

13

26%

Other 5

82

27%

32

64%

Remuneration

268

89%

50

100%

Risk

57

19%

21

42%

Audit 1

3

6

7

1 Includes: stand alone Audit Committee, Audit & Compliance Committee, Audit Compliance & Risk Committee and an Audit & Risk Committee.

2 Stand alone Compliance Committee.

3 Stand alone Nomination Committee.

4 Includes: stand alone OH/S Committee, OH/S & Environment Committee and a standalone Environment Committee.

5 All other committee types.

6 Includes: stand alone Remuneration Committee, Remuneration & Nominations Committee and Remuneration & HR Committee.

7 Includes stand alone Risk Committee, Finance Committee and Risk & Investment Committee.

21

New Zealand: Non Executive Chairmen and Non Executive Directorsâ&#x20AC;&#x2122; fees New Zealand leading companies ranked by revenue The analysis of New Zealand companies has been compiled in New Zealand dollars.

Table 8 sets out the fees paid to Non Executive Chairmen among leading New Zealand companies. It will be noted that the average fee stood at NZ$130,637, at the median NZ$101,000 and at the 75th percentile NZ$162,917.

Fees paid to Non Executive Directors in New Zealandâ&#x20AC;&#x2122;s Top 50 companies on average stood at NZ$73,395, at the median NZ$63,000 and at the 75th percentile NZ$90,000.

Ranking the Top 50 New Zealand companies by revenue, the average fees paid to Chairmen in the Top 10 organisations are NZ$223,713 and the median is NZ$193,634 compared with those companies ranked 25-50 where the average fee is NZ$95,567 and the median fee NZ$90,000.

Size of company in terms of revenue also has an impact on fees for Non Executive Directors with the Top 10 ranked companies having an average of NZ$111,038 and a median of NZ$107,500 while those companies ranked Top 25-50 have average Non Executive Director fees of NZ$56,655 and median fees of NZ$52,000.

22

Table 8

Non Executive Chairmen and Non Executive Directors’ fees in New Zealand leading companies by revenue

Average Median Top 50 Companies by revenue NZ$ NZ$

75th Percentile NZ$

25th percentile NZ$

Sample #

Total sample Chairman

130,637

101,000

162,917

80,000

47

Non Executive Director

73,395

63,000

90,000

50,000

208

Chairman

304,767

302,500

381,000

226,267

4

Non Executive Director

144,942

154,791

159,280

125,354

19

Chairman

149,422

154,013

185,000

103,250

12

Non Executive Director

79,445

78,975

90,000

65,000

62

Chairman

112,994

105,500

129,885

86,250

14

Non Executive Director

66,157

60,000

77,938

48,750

59

Chairman

90,936

80,000

100,000

74,000

17

Non Executive Director

54,167

50,000

60,000

44,875

68

Revenue ranges greater than $2 billion

Revenue ranges $500 million - $2 billion

Revenue ranges $200 million - $500 million

Revenue ranges less than $200 million

Revenue ranked Top 10 Companies Chairman

223,713

193,634

238,375

160,208

10

Non Executive Director

111,038

107,500

147,357

79,937

47

121,940

126,000

137,500

85,000

13

71,121

72,500

88,803

50,000

64

Chairman

96,567

90,000

103,250

74,750

24

Non Executive Director

56,655

52,000

60,000

45,000

97

Revenue ranked Top 10 - 25 Companies Chairman Non Executive Director Revenue ranked Top 25 - 50 Companies

New Zealand leading companies by market capitalisation As in Australia, Directors’ fees were highest among larger companies when ranked by market capitalisation.

Table 9 shows the fees paid to Non Executive Directors in New Zealand’s leading organisations.

Chairmen in the Top 10 New Zealand companies were paid average fees of NZ$219,068 and median fees of NZ$185,426. The average Chairman’s fee in companies ranked 25-50 by market capitalisation is NZ$88,501 and the median fee NZ$80,000. Fees for Non Executive Directors with the top 10 ranked companies have an average of NZ$114,729 and a median of NZ$107,00 while those companies ranked 25-50 have average Non Executive Director fees of NZ$53,192 and median fees of NZ$50,000.

23

Table 9:

Non Executive Chairmen and Non Executive Directorsâ&#x20AC;&#x2122; fees in New Zealand leading companies by market capitalisation

Top 50 Companies Average Median by market capitalisation NZ$ NZ$ Total sample

75th percentile NZ$

25th percentile NZ$

Sample #

Chairman

130,637

101,000

162,917

80,000

47

Non Executive Director

73,395

63,000

90,000

50,000

208

Chairman

219,068

185,426

231,500

176,589

10

Non Executive Director

114,729

107,100

141,232

90,000

47

134,340

156,125

100,000

14

70,000

87,200

50,055

69

74,500

23

42,313

92

Market capitalisation ranked Top 10 Companies

Market capitalisation ranked Top 10 - 25 Companies Chairman 100 Non Executive Director

136,696 Male 72,177

Market capitalisation ranked Top 25 - 50 Companies 80 Chairman

Female 88,501

Non 60 Executive Director

53,192

NB Non Executive Director excludes Chairmen 40

New Zealand: Board demographics 20

The ability to become

a strategic partner to 80,000 100,500 the CEO and develop 50,000 knowledge 60,000 in-depth of the business is not simply desireable but mandatory for success as a CFO.

Board composition by gender â&#x20AC;&#x201C; Non Executive Directors 0

executive Non executive chairman Chart 6Non shows that,directors as in Australia, males hold the overwhelming majority of Non Executive Director positions in the Top 50 New Zealand companies. 95.8 percent of Non Executive Chairmen are males while, females occupied only 11.7 percent of Non Executive board positions.

Chart 6

Board composition by gender for Top 50 95.8%

100%

88.3%

Male Female

11.7% 4.2% 0%

24

Non Executive Directors Non Executive Chairmen

Board comparison by age â&#x20AC;&#x201C; Non Executive Directors and Chairmen It should be noted that not all Directors in the sample disclose their age.

For all Non Executive Directors and Chairmen across the Sample, the average age is 60 years (Table 10).

Table 10

Age of Chairmen and Non Executive Directors in New Zealand Top 50 Companies

Top 50 Companies by Revenue Average Median Total Sample

60

75th Percentile

25th Percentile

Sample #

67

55

85

59

15

61

Revenue Ranges Greater than $2 billion

61

61

64

$500 million - $2 billion

60

59

67

56

33

$200 - $500 million

60

61

65

54

22

Less than $200 million

60

63

69

56

15

New Zealand: Board committees Distribution of committee types Table 11 shows that all the Top 50 companies in New Zealand have an Audit Committee, and 90 percent have a Remuneration Committee.

Table 11

Distribution of core committees in New Zealand Top 50 Companies

Committee Audit 1 Compliance 2

Top 50 #

Top 50 %

50

100%

1

2%

Corporate governance

3

6%

Nominations 3

21

42%

Occupational health & safety 4

4

8%

Other

10

20%

Remuneration

45

90%

Risk 7

9

18%

5

6

Includes: stand alone Audit Committee, Audit & Compliance Committee, Audit Compliance & Risk Committee and an Audit & Risk Committee.

1

2 Stand alone Compliance Committee.

3 Stand alone Nomination Committee.

4 Includes: stand alone OH/S Committee, OH/S & Environment Committee and a standalone Environment Committee.

5 All other committee types.

6 Includes: stand alone Remuneration Committee, Remuneration & Nominations Committee and Remuneration & HR Committee.

7 Includes: stand alone Risk Committee, Finance Committee and Risk & Investment Committee.

25

List of organisations surveyed â&#x20AC;&#x201C; Australia Abacus Property Group

Automotive Holdings Group Limited

Coalspur Mines Limited

Acrux Limited

Avoca Resources Limited

Coca-Cola Amatil Limited

Adelaide Brighton Limited

AWB Limited

Cochlear Limited

Aditya Birla Minerals Limited

AWE Limited

Cockatoo Coal Limited

AGL Energy Limited

AXA Asia Pacific Holdings Limited

Codan Limited

ALE Property Group

Bank of Queensland Limited

Commonwealth Bank of Australia

Alesco Corporation Limited

Beach Energy Limited

Computershare Limited

Allied Gold Limited

Bell Financial Group Limited

ConnectEast Group

Alumina Limited

Bendigo and Adelaide Bank Limited

Consolidated Media Holdings Limited

Amalgamated Holdings Limited

BHP Billiton Limited

Corporate Express Australia Limited

Amcom Telecommunications Limited

Billabong International Limited

Count Financial Limited

Amcor Limited

BKI Investment Company Limited

Country Road Limited

AMP Limited

Blackmores Limited

Crane Group Limited

Ampella Mining Limited

BlueScope Steel Limited

Cromwell Group

Ansell Limited

Boart Longyear Limited

Crown Limited

AP Eagers Limited

Boral Limited

CSG Limited

APA Group

Bow Energy Limited

CSL Limited

APN News & Media Limited

Bradken Limited

CSR Limited

Aquila Resources Limited

Brambles Limited

CuDeco Limited

ARB Corporation Limited

Breville Group Limited

Customers Limited

Argo Investments Limited

Brickworks Limited

David Jones Limited

Aristocrat Leisure Limited

Brockman Resources Limited

Dexus Property Group

Arrow Energy Limited

BT Investment Management Limited

Discovery Metals Limited

Asciano Group

Cabcharge Australia Limited

Diversified United Investment Limited

Aspen Group Limited

Caltex Australia Limited

Dominion Mining Limited

ASX Limited

Campbell Brothers Limited

Dominos Pizza Enterprises Limited

Atlas Iron Limited

Cape Lambert Resources Limited

Downer EDI Limited

Ausdrill Limited

Carbon Energy Limited

Eastern Star Gas Limited

Ausenco Limited

Cardno Limited

Elders Limited

Austal Limited

Carlton Investments Limited

Emeco Holdings Limited

Austar United Communications Limited

Carnarvon Petroleum Limited

Energy Developments Limited

Austbrokers Holdings Limited

Carsales.com Limited

Energy Resources of Australia Limited

Austereo Group Limited

Cash Converters International Limited

Envestra Limited

Austin Engineering Limited

Catalpa Resources Limited

Extract Resources Ltd

Australand Property Group

CBH Resources Limited

Fairfax Media Limited

Australia and New Zealand Banking Group Limited

Cellestis Limited

Fantastic Holdings Limited

Centennial Coal Company Limited

FKP Property Group

Australian Agricultural Company Limited

CGA Mining Limited

Fleetwood Corporation Limited

Australian Foundation Investment Company Limited

Challenger Financial Services Group Limited

FlexiGroup Limited

Australian Pharmaceutical Industries Limited

Charter Hall Group

Forge Group Limited

Australian United Investment Company Limited

Choiseul Investments Limited

Fortescue Metals Group Limited

Citadel Resource Group Limited

Fosterâ&#x20AC;&#x2122;s Group Limited

Clearview Wealth Limited

Gindalbie Metals Limited

Clough Limited

Giralia Resources NL

26

Flight Centre Limited

Global Mining Investments Limited

Medusa Mining Limited

Premier Investments Limited

Gloucester Coal Limited

Mermaid Marine Australia Limited

Primary Health Care Limited

Goodman Fielder Limited

Mesoblast Limited

Prime Infrastructure Group

Goodman Group

Metcash Limited

Prime Media Group Limited

GPT Group

Milton Corporation Limited

GrainCorp Limited

Minara Resources Limited

Programmed Maintenance Services Limited

Grange Resources Limited

Mincor Resources NL

Qantas Airways Limited

GUD Holdings Limited

Mineral Deposits Limited

QBE Insurance Group

Gunns Limited

Mineral Resources Limited

Ramsay Health Care Limited

GWA International Limited

Mirabela Nickel Limited

REA Group Limited

Harvey Norman Holdings Limited

Mirvac Group Limited

Reckon Limited

Hastie Group Limited

Mitchell Communications Group Limited

Redflex Holdings Limited

Healthscope Limited

Molopo Energy Limited

Reece Australia Limited

Hills Industries Limited

Moly Mines Limited

Regis Resources Limited

Horizon Oil Limited

Monadelphous Group Limited

Reject Shop Limited (The)

Hutchison Telecommunications (Australia) Limited

Mount Gibson Iron Limited

Resolute Mining Limited

Murchison Metals Ltd

Retail Food Group Limited

iiNet Limited

National Australia Bank Limited

Ridley Corporation Limited

Iluka Resources Limited

National Hire Group Limited

Rio Tinto Limited

Incitec Pivot Limited

Navitas Limited

Riversdale Mining Limited

Independence Group NL

New Hope Corporation Limited

Roc Oil Company Limited

Industrea Limited

Newcrest Mining Group

SAI Global Limited

Infigen Energy Limited

Nexus Energy Limited

Salmat Limited

Insurance Australia Group Limited

NIB Holdings Limited

Sandfire Resources NL

Intrepid Mines Limited

Nkwe Platinum Limited

Santos Limited

InvoCare Limited

Northern Iron Limited

Sedgman Limited

IOOF Holdings Limited

NRW Holdings Limited

SEEK Limited

IRESS Market Technology Limited

Nufarm Limited

Servcorp Limited

Iron Ore Holdings Limited

OneSteel Limited

Seven Group Holdings Limited

iSOFT Group Limited

Orica Limited

Sigma Pharmaceuticals Limited

JB Hi-Fi Limited

Origin Energy Limited

Silex Systems Limited

Kagara Limited

OrotonGroup Limited

Silver Lake Resources Limited

Karoon Gas Australia Limited

OZ Minerals Limited

Sims Metal Management Limited

Kingsgate Consolidated Limited

Pacific Brands Limited

Sirtex Medical Limited

Kingsrose Mining Limited

Paladin Energy Limited

Skilled Group Limited

Leighton Holdings Limited

PanAust Limited

SMS Management & Technology Limited

Lend Lease Group

Panoramic Resources Limited

Sonic Healthcare Limited

Linc Energy Limited

PaperlinX Limited

SP AusNet

Lynas Corporation Limited

Peet Limited

Spark Infrastructure Group

MAC Services Group Limited (The)

Perilya Limited

Sphere Minerals Limited

Macarthur Coal Limited

Perpetual Limited

Spotless Group Limited

Macmahon Holdings Limited

Perseus Mining Limited

St Barbara Limited

Macquarie Group Limited

Pharmaxis Limited

Stockland Corporation Limited

Mantra Resources Limited

Platinum Australia Limited

Straits Resources Limited

McMillan Shakespeare Limited

Platinum Capital Limited

27

List of organisations surveyed â&#x20AC;&#x201C; New Zealand STW Communications Group Limited

Abano Healthcare Group Limited

Sky Network Television Limited

Summit Resources Limited

AFFCO Holdings Limited

SKYCITY Entertainment Group Limited

Suncorp-Metway Limited

Air New Zealand Limited

Steel & Tube Holdings Limited

Super Cheap Auto Group Limited

Auckland International Airport Limited

Telecom Corporation of New Zealand

TABCORP Holdings Limited

Briscoe Group Limited

TOWER Limited

Tassal Group Limited

Cavalier Corporation Limited

TrustPower Limited

Tatts Group Limited

Contact Energy Limited

Turners & Growers Group

Technology One Limited

Delegatâ&#x20AC;&#x2122;s Group Limited

Vector Limited

Telstra Corporation Limited

EBOS Group Limited

Wakefield Health Limited

Ten Network Holdings Limited

Fisher & Paykel Appliances Holdings Limited

Warehouse Group Limited (The)

Thakral Holdings Limited Toll Holdings Limited TOWER Australia Group Limited TPG Telecom Limited Transfield Services Limited Transpacific Industries Group Ltd Transurban Group Limited Troy Resources NL UGL Limited Unilife Corporation Universal Biosensors Inc Valad Property Group

Fisher & Paykel Healthcare Corporation Limited Fletcher Building Limited Freightways Limited Hallenstein Glasson Holdings Ltd Infratil Limited Lyttelton Port Company Limited Mainfreight Limited Methven Limited Metlifecare Limited Michael Hill International Limited

Village Roadshow Limited

Millennium & Copthorne Hotels New Zealand Limited

Virgin Blue Holdings Limited

New Zealand Exchange Limited

Washington H Soul Pattinson & Company Limited

New Zealand Oil & Gas Limited

Watpac Limited

New Zealand Refining Company Limited (The)

Wesfarmers Limited

Nuplex Industries Limited

West Australian Newspapers Holdings Limited

NZ Farming Systems Uruguay Limited

Western Areas NL Westfield Group Westpac Banking Corporation White Energy Company Limited Whitehaven Coal Limited WHK Group Limited Wide Bay Australia Ltd Woodside Petroleum Limited Woolworths Limited WorleyParsons Limited Wotif.com Holdings Pty Ltd

Opus International Consultants Limited PGG Wrightson Limited Pike River Coal Limited Port of Tauranga Limited Property For Industry Limited Pumpkin Patch Limited Pyne Gould Corporation Limited Rakon Limited Restaurant Brands New Zealand Ltd Rubicon Limited Ryman Healthcare Limited Sanford Limited Skellerup Holdings Limited

28

Xero Limited