24 November 2008

Directors increase fees by up to 40% despite loss

Today I went to the AGM of the RAA (Royal Automobile Association of South Australia).

A major item on the agenda was a proposal to increase the remuneration available to the Directors by 40%, from a total of $250,000 to $350,000. This despite a loss of $2,000,000 in the last financial year (due mostly to poorly performing investments).

The explanatory note issued with the AGM papers (and available in the current SA Motor magazine at p8) states

Independent advice received by the RAA Board from Mercer Human Resource Consulting indicates that the level of remuneration paid to RAA Direcors is significantly less than the rate paid to directors of similar sized commercial organisations and public companies. There is no intention to change this margin, since it is recognised that serving on the RAA Board will always include an element of community service. However, it is clear that the cap on the total amount permitted by the RAA Rules for allocation to the Directors needs to be increased to provide flexibility to recognise the changing responsibility of Directors in a complex business environment, ensure we are able to attract and retain appropriate skills, and allow for inflationary movements over the coming years. This will ensure that RAA continue to be remunerated at a reasonable level whilst maintaining the discount well below the rate applied to directors of comparab le commercial organisations.

The Board considers that the proposed new maximum total amount of $350,000 will enable the RAA to continue to provide suitable recognition to Directors for their time and expertise.

The motion was carried, though only, as I recall, by 200-300 votes in a total of almost 7,000 cast (most of them by proxy).

I have no objection to large non-profit organisations like the RAA remunerating directors but my eyebrows, and those of many other members, were raised by the percentage increase sought and granted in the current environment. I can only hope that the Board exercises some restraint when it comes to determining just how much will be paid to whom.

For many, probably most, South Australians the RAA's core business is providing services to motorists, yet it derives a lot of its income from commercially oriented related activities such as insurance. I hope that this continues and that the insurance tail doesn't come to wag the service dog.

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