Is it enough to accept the well-worn line that Chief Executives are paid similar to their overseas counterparts, or should New Zealand be pushing for change?

There has been much discussion over the $8.32 million salary package of Theo Spierings, Fonterra's CEO and the highest paid executive of any listed New Zealand company, particularly as the gap between CEO compensation and worker income widens.

Spierings was paid a base salary of $2.463m, benefits of $170,036, short-term incentive pay of $1.832m and long-term incentive pay of $3.855m, which worked out to an annual increase of 78.5 per cent.

Fonterra explained the increase of its CEO pay packet by saying independent third-party remuneration advisers appointed by the board benchmarked the salary package, and measured against 24 Australian listed companies of similar size.

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We are continually told seven figure sums are needed to retain top executives, without any substance or proof that it needs to be that high.

The reality is that it is the independent third-party remuneration advisers who set the expectations. Compensation consultants use median pay levels from the previous year to determine the median pay level for the current round of contracts; as pay levels increase the median pay level also goes up, driving all CEO pay levels up in that industry.

So the decisions are effectively being made based on the recommendations of only a few.

This becomes a never-ending cycle of artificially inflated salary packages, irrespective of company performance or any parity with pay for salaried workers- companies are effectively being held to ransom.

My research indicates there is a reciprocal relationship between changes in CEO and directors pay. The association is strongest when the CEO is also a board member. The results show that excess CEO compensation is an unwarranted pay rise rather than a reward for unobserved private CEO effort.

Such packages don't reflect the New Zealand business environment. It's time to ask questions and insist on greater accountability and less secrecy - if there is good reason to pay, be clear about what that is.

This year is the first time Fonterra has disclosed the CEO's actual salary in the annual report, rather than within a salary band as has been done in the past, and is typical of companies where the CEO is not on the board. But it's only a small step in making its annual results more transparent to the people that own the company.

Companies also need to disclose to their shareholders about what constitutes a performance bonus.

It's hard for shareholders and the public to understand what Fonterra means when it says its CEO's performance bonus was because "the value-add side of the business had gone very well, and Fonterra's far reaching targets under its "velocity" programme had been met."

It is all very jargon specific and unclear to a lay reader. What is the "value-add side of the business," what does this refer to and how is it measured and in what way does it relate to CEO pay?

And what are the 24 Australian listed companies of similar size?

The real question is how changes in CEO pay relate to changes in their firm's value. And what happens to CEO pay when the firm does not do well - does CEO pay decrease to reflect the loss in shareholder value?

Should the CEO be paid very large bonuses or one-off injections of equity (e.g. big option or share issues) because their firm is doing better?

The fact is that Fonterra's CEO won a bonus in an average season, when farmers received lower than expected dairy payouts and profit was down by 11 percent.

Not only that, the CEO opted for a "payout freeze" during the diary downturn of 2016, when payments to farmers dipped to record lows. That price freeze meant delaying rather than foregoing the performance bonus, as surprisingly the 2016 performance bonus was tacked on to this year's payout - he received two bonus pays in 2017.

Farmers or suppliers who had a problem with the large payout were invited to question their board, and I think that's exactly what all shareholders should be doing of their company's annual results.

Are you happy with the amount of information available on how pay is set, on how bonuses are paid out? Are you happy with the amount of information available on benchmarking?

A look through the annual reports of many other publicly listed New Zealand companies is equally vague about the measurement criteria used to award its CEO performance bonuses.

For example, Nick Grayston, the newly appointed CEO of the Warehouse earned $1.398 million which included a $0.464 million entitlement to a short term incentive payment for achieving a "specified earnings target" and "individual performance" goals during the first eight months of employment.

The 2016 FMA review of requirements on companies to disclose information was the ideal opportunity to force change. However, while good reporting is encouraged, only 37% of all NZ companies currently meet the recommended disclosures.

Dr Helen Roberts from the University of Otago Business School is studying the relationship between CEO compensation, firm performance and corporate governance, and has established an extensive database of the cash and equity incentive components of compensation for CEOs of publicly listed New Zealand firms.