Exploring opportunities to solve the gender pay gap in director remuneration

Once you have read this paper, we are interested in your comments on how to close the Director gender pay gap. Please fill in our survey HERE.

Fixing the Director Gender Pay Gap: Exploring opportunities to solve the gender pay gap in director remuneration

Discussion Paper by Ruth Medd, WOB Chair and Co-founder

On the face of it, remuneration of Non-Executive Directors (Directors) in Australian organisations looks to be gender blind. But this ignores the portfolio effect of a remuneration structure whereby Directors are remunerated via a fee plus additional amounts for chair and deputy chair roles, committee work and chairing a committee. While the fee is non-gendered (as you would expect), this results in a varying range of Director remuneration across nearly all board types.  It also ignores the clustering of women on lower or unpaid boards.

Can you make a living from Directorship?

It is now a reality (almost) that Directorship has become a viable employment option immediately after a professional / executive career. A board load of three to four paid roles, a voluntary role plus other activities could well fill the dance card of most diligent Directors. 

However, when putting their ideal board portfolio together, women need to consider if three mid ranking roles at $50,000 would make it viable and if achieving these three modestly paid roles is doable.

Many women join WOB to secure a paid board, having done the unpaid circuit for many years. This says something about the availability of paid roles for women.  For those women who consider their directorship journey as a portfolio building exercise comprising both paid and unpaid roles, the reality is that it may sometimes be wiser to stay in your day job or combine both executive and non-executive roles if conflicts permit.

WOB has made great efforts for the past 20 years, commencing well before our official formation in 2006, to increase the number of female Directors in paid and unpaid board roles.

We have been largely successful, with women’s participation on boards increasing from a bare minimum in 2009 when WOB began to collect the data, to today where a number of sectors have reached the 40% plus milestone. See our comprehensive Boardroom Diversity Index for a snapshot of a range of sectors over time.

However, while women are gaining access to Australia’s boardrooms in increasingly greater numbers it is clear they are not achieving parity when it comes to payment for their service.

Let’s unpack director remuneration pecking order

1. Listed companies - remuneration is based on market capitalization. This means a Director of a top 50 company will receive more than the one serving on the board of a top 200 company and so forth.
2. Private companies - likely to follow the listed model, using company size as a comparator.
3. Government entities - The best place to look at the remuneration of federal government boards at  https://bit.ly/3lFe5n4  
4. Not for profit - WOB and AICD research both find that 20% of NFPs pay their Directors. 
5. Startups – no remuneration, often shares, a mix of cash and shares or share options.

Now let’s look at where women hold board roles and compare them with rates of pay on offer.

*In 2022 women occupy 34.1% of ASX 100 roles, 34.2% of ASX200 roles and 28.8% of ASX 200-301 roles. Below the ASX300 female participation is still very low. 

** Data taken from AICD Not for Profit Governance and Performance Study. 

It is clear that women are grouped at the bottom of the table in the lower and unpaid boards, often in the care or related sectors. Using the 1300 plus boards in its Boardroom Diversity Index, WOB estimates women receive 32% of the total remuneration on offer to boards surveyed. 

How to make directorship more viable for women?

Below are some options for increasing women’s share of the director remuneration pool above the estimated level of 32%. 

1. Increase percentage of female directors on ASX 200 boards to 50% This will impact relatively few women (300) and increase the remuneration earnings pool for women from 32% to 50% of total pool (estimated at $175m)
2. Increase paid roles in NFP boards to 30%, up from current estimate of 20%   This will result in the female share of the director remuneration pool increasing by an estimated $51m over 22,000 females.
3. Increase percentage of female directors on paid NFP boards from 40% to 60% This is consistent with the social care remit of many NFP boards who also have large female work forces. This will result in the female share of the director remuneration pool increasing to from 40.4% to 60.5% and $60m and an extra 22,000 females being remunerated 

Of the three options, WOB is of the view that option two is both palatable and most likely to gain traction, particularly as the care sector becomes more highly regulated and time demands and risks for Directors’ increases. 

The 2021 AICD Not For Profit Governance and Performance Study indicated that 82% of NFP boards hadnot had a conversation about remuneration.  Once this is started it is likely to get a head of steam.  A way forward is for an outgoing chair to start the conversation, alleviating any accusation of self-interest. WOB has seen this work on numerous occasions.  

We are interested to hear your comments on this paper and on our suggestions regarding options to close the Director gender pay gap. Please take time to fill in our survey HERE.

Any direct comments or questions please reply to the author, Ruth Medd, on ruth.medd@womenonboards.org.au