Retirement village and aged-care operator Arvida is asking shareholders to approve a 28 per cent increase in the amount of money available to pay its six directors after seeking advice from the Institute of Directors.
The proposal – to be voted on at the company’s annual meeting in early July -can be viewed as a looming trend as NZX companies have grown in size and complexity with many not having reviewed director fees for several years.
In Arvida’s case the fees were last set in 2016 (ratified in 2017) when its market capitalisation was $334 million and it was the owner of 21 retirement communities. At April 30 this year the company’s market cap was $977m with 33 communities.
In its notice of meeting, Arvida outlined the new fee proposal that would see the maximum fee pool climbing from $500,000 to $640,000, up 28 per cent. The company has no current plans to add another director to the board.
Under the proposal chairman Peter Wilson’s base remuneration would climb 10 per cent from $150,000 to $165,000. The other five directors would see their base fee increase 9.76 per cent from $82,000 to $90,000. An extra $3,000 has been allocated for board committee members.
The big change, however, comes in the form of “ad hoc” fees for any significant additional board work required over and above usual duties.
This would see directors paid at the rate of $350 per hour for any such additional work. It would be capped at $83,000 per year.
Arvida said its board engaged the Institute of Directors (IoD) to conduct a benchmarking review of director fees. It recommended base directors’ fees of $86,000-91,000, a chair fee of $155,000-$170,000 and a committee chair fee of $10,000-$15,000.
On that advice it considered the increase to be appropriate and aligned to market.
“Notwithstanding the increase in size and complexity of the Arvida business … the proposed increases are mostly reflective of inflation,” the company said in its notice of meeting notes.
IoD did not provide advice on the additional payments at $350 per hour.
The proposal comes as retirement village bosses vow to improve systems after Associate Housing Minister Poto Williams called for the industry to clean itself up, offering clearer contracts and a better complaints system.
NZ Shareholders’ Association chairman Oliver Mander said his organisation had been briefed on Arvida’s directors’ fee proposal and he was satisfied that it fitted within the benchmark provided by IoD.
“It looks pricey but we are comfortable with it. The increased size and complexity of the business is a good argument for the increase, given the last reset was in 2016.”
Mander told the Herald to expect a lot more NZX companies to follow suit, especially those that had not adjusted for some time. The association would be keeping a close eye on it, he added.
Arvida’s notice of meeting coincided with the company’s result announcement that showed a net profit of $131.1m for the year to March 31, up from $42.6m with unrealised gains contributing $121.3m to the latest result.
The underlying second-half result was up 53 per cent, offsetting additional costs incurred in the first half to cope with disruption from Covid-19.
“While we continued to operate throughout the pandemic as an essential business, care admissions, sales and construction activities were significantly disrupted in lockdown periods,” Chief executive Bill McDonald said.
Arvida will pay a fourth-quarter dividend of 1.5 cents per share, taking the annual payout to 5.35c, down from 5.8c last year, amounting to 56% of underlying net profit.
The shares rose 1 per cent to $1.83.
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