Career 15: What does your boss earn - and is it fair?

Every time chief executive salaries hit the headlines, ordinary mortals grumble. Photo / Wavebreakmedia Ltd

Diana Clement checks out the difference between workers in the big corner office and on the shop floor, and offers some ideas on asking for a pay rise.

Your boss probably takes home a bit more than you. But is 100 times more really fair? The boss is earning squillions. Why shouldn't I?

Every time chief executive salaries hit the headlines, ordinary mortals grumble. If you're struggling to pay the rent, mortgage, food or other day-to-day expenses it can seem very unfair.

The Herald's executive pay survey found the average total remuneration for a chief executive at the country's largest firms was $1.4m in 2013, a four per cent increase on 2012. Did your salary go up four per cent last year?

ANZ's David Hisco was the highest paid chief executive in the survey, earning $4.1 million, which unions say was 120 times higher than the lowest paid worker.

In places 2 to 5 were the chief executives of Fonterra, Fletcher Building, Westpac and Sky City Entertainment Group who each earned between $2.9m and $3.5m.

Even the Ministry of Foreign Affairs and Trade chief executive John Allen was earning $620,000, and his organisation didn't even need to make a profit for shareholders.

Does that make you feel green with envy? The answer for individuals may be to climb the greasy pole themselves, or ask for a pay increase. Sitting back and doing nothing sees the pay gap get greater if the past 30 years is anything to go by.

BusinessNZ chief executive Phil O'Reilly says the pay gap between CEOs and other workers in New Zealand is much less than in other developed countries.

"Looking at major companies in those countries, CEOs' pay tends to be many times higher than employees' pay," says O'Reilly.

"In Australia it's about a hundred times higher. In Canada and the UK you see multiples like 130 and 160. In the US it's around 350 times average employee pay.

O'Reilly says the average here is around 26 times the average employee's pay.

"It's important to remember the critical role and accountability of a CEO who is ultimately responsible for a company's success or failure."

Not everyone agrees. Bill Rosenberg, the Council of Trade Unions economist and policy director, says high chief executive salaries are a phenomena of Anglo-Saxon countries. "CEO salaries in New Zealand are ridiculous," he says.

Chief executive salaries in countries such as Sweden and Japan don't have a differential anywhere near as high as here.

Rosenberg quotes Thomas Piketty, author of Capital in the Twenty-First Century, who writes that it is self-serving to say you won't get the right people if you don't payinflated salaries to chief executives.

Piketty watched the growing disparity between executivesalaries and ordinary wages in Anglo-Saxon economies that began in the 1980s.
The banks in particular cannot defend chief executive salaries, Rosenberg says.

"They justify the salaries saying, 'We need the sharpest brains in a competitive economy'.
"But it just doesn't make sense. These are companies that are in quite a protected, highly regulated, part of the economy and are guaranteed high returns short of complete irresponsibility by the CEO."

The Warehouse chief executive Mark Powell said publicly that he was embarressed by his $1.7m salary package.Photo / Dean Purcell

He adds that the productivity of a company comes from the joint enterprise of all the people in the organisation. "Why should the chief executive of a large organisation in Japan or Sweden be so much less productive doing a similar job to the chief executive of the ANZ?"

The pay differential of 1:100 between the lowest paid workers and the chief executive is "justabsurd".

Rosenberg says it's not just the minimum wage that needs toincrease.

All people in the bottom half of wage distribution need a pay rise in his opinion.
The Warehouse's chief executive Mark Powell said publicly that he was embarrassed by his $1.7m salary package.

But if chief executives don't share their salary packages with ordinary workers then it's up to the staff to bargain hard (individually or collectively) and walk if they're not being paid enough.

If you don't ask for a salaryincrease you may simply not get one.
It can be difficult to ask, but a lot of people give up before first base.
If you're going to seek a pay rise, be prepared, says Penni Hlaca, Randstad recruitment agency's general manager in Christchurch.

The first step is to prepare your case so that your employer can't just brush you aside.

This includes:

•Always make sure you give your manager a warning before you ask for more money.
Catching him or her off guard isn't a good move.
Forewarning will give youremployer time to do the necessary research as well.

If you're a good employee, they won't want to lose you.

• Word your request diplomatically. Telling the boss, "I'm underpaid and undervalued", or coming in aggressively with, "Give me more money or I'll quit," isn't going to endear you.

Every situation is different but Hlaca recommends saying something such as, "Listen, I have been thinking about the value I have been adding to the team lately. I would like to have a conversation with you to see if my salary could be reviewed."

If you really want to progress in the salary stakes, then you will need to move into more senior roles.
Some people manage to do this very early in their careers.
As a result they will earn a lot more over their lifetime than a co-worker who started in the same role, but wasn't ambitious.

The alternative is to use your existing skills to move sideways into a higher paying industry.

Even if your request isn't successful, act graciously, says Hlaca.
"Ask for feedback. There could be factors outside your role such as restrictions on what your manager can and can't do," she says.

How to ask for a pay rise

•Make a list of your achievements over the last 12 months.

•Match the list against your job description and ask yourself honestly if you are doing a good job.

•Check your behaviours. Are you displaying the right behaviours to make you a desired worker in your organisation?

•Find out the going rate for your job. Recruitment agencies often have research that they're happy to share with jobseekers.
Source: Penni Hlaca, Randstad