Bonuses drop as bosses struggle to meet targets

Chief executive performance bonuses have fallen to their lowest level since the millennium as bosses struggle to meet their targets in the tough economic environment, according to executive recruitment specialists Sheffield.

The company's annual survey of 500 CEOs has found fewer executives are being paid performance bonuses and those who are receiving them are getting less than the full allotment.

The incidence of those getting a bonus fell from 65 per cent to 53 per cent and the median bonus payment of $36,670 was only 75 per cent of the target payment.

"This is the lowest level of bonus achievement in the last nine years," Sheffield reward manager Jarrod Moyle said.

He believes the drop indicates the challenges chief executives are facing in achieving their performance targets but says not all of the drop can be attributed to financial underperformance.

"With prominent international examples of executives receiving bonuses while their company is recording massive losses, New Zealand companies are reluctant to embrace at-risk pay."

He said there was a nervousness among companies to appear not to be indulging in executive excesses and many were in the process of reviewing their executive pay structures.

But Moyle predicted executives were unlikely to receive many, if any, bonus payments in the next couple of years and base salaries were also under pressure.

The survey found median base pay increased at a rate of 5.2 per cent to $176,800, slightly up on last year's 5 per cent median increase and ahead of the annual inflation rate.

But Moyle expected growth to fall to less than 3 per cent this year.

"There are definitely signs this level of increase will not continue in the coming year. Many organisations have imposed freezes on executive pay, and we predict a much smaller overall increase of around 2-3 per cent for 2009."

Moyle said a labour shortage experienced in recent years was no longer an issue but retention of key staff remained a concern.

"Despite rising unemployment, retaining key executive talent is now more important than ever which means organisations must get creative with pay."

The pay survey was undertaken during December and January and took in executives in both the public and private sectors.

BRAKES PUT ON LUXURY CARS AS PART OF EXECUTIVE PAY

It's out with the Audi and in with the Camry.

Luxury cars - one of the iconic perks of executive packages - are no longer standard when it comes to corporate deals.

According to an annual survey of 500 executives by consultancy experts Sheffield, only 23 per cent were given a car as part of their package last year compared with 40 per cent in 2007 and the vehicles were smaller and cheaper.

Sheffield reward practice manager Jarrod Moyle said the provision of cars had been steadily declining but the 2008 figure was the lowest ever.

Moyle attributed the drop to cost cutting measures.

Provision of medical insurance was also slightly down at 22 per cent but superannuation payouts had risen.

Of those surveyed, 33 per cent got some form of superannuation contribution during 2008.

Executives often also had professional or association fees paid for them as well as phone and internet costs although these were now considered to be inherent to the job, rather than a perk, Moyle said.

THE TYPICAL NZ CHIEF EXECUTIVE
* Is aged between 47 and 58.
* Is male.
* Has been in the role less than five years.
* Receives a total package worth $265,000.
* Six times the annual median income of full-time wage and salary earners.