What’s Really Going On With Contact Energy’s Directors’ Fees?
October 29th, 2008
It is surprising how superficially the media have treated Contact Energy’s announcement it has backed down on its proposed increase in Directors’ fees. The truth is, Contact’s Board has voted to almost double its pool of Directors’ fees from $770,000 to $1.5m. At the same time, it has decided individual Directors will not get any increase in their base fee of $100,000 a year. So why the need for all that extra money sitting in the pool? Anyone who listened to Chairman Grant King carefully would have heard him refer to an explosion in committee work created by new Companies Act obligations on Directors and the impact of new international accounting rules, which Director John Milne alluded to.
So while Contact’s Directors will continue to receive a base fee of $100,000 a year (relatively low compared with other similar-sized companies) the enlarged fees pool will allow them to be paid for additional work above their base fee. So ultimately, we can assume they will get more. And if King and Milne are correct about the additional workload, the Directors deserve to be paid more. Another reason Contact needs to increase the fees pool is they are understood to be planning to jettison some of the old guard of independent Directors. In this case, they will need extra money to pay these Directors to serve out their terms, while appointing fresh blood.
Furthermore, Grant King and Karen Moses, the Origin Directors on the Contact Board, have gone without pay for the last two years because the fee pool was too small to pay them. King and Moses will now be paid by Contact from the enlarged fees pool.
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