Finance Minister Grant Robertson. Photo / File
COMMENT:
The Government is muscling the chairs of Crown-related companies to cut directors' fees and executive pay.
The chairs - which include the prominent directors who lead three energy companies listed on the NZX - were given just 48 hours to signal what actions they would take to "exercise restraint" in the next financial year when it comes to director fees and executive pay.
Treasury officials sent out an email to chairs of various state-owned and partially state-owned enterprises late last Wednesday afternoon. While it did not mention Finance Minister Grant Robertson or State-Owned Enterprises Minister Winston Peters by name - they are the Coalition's key shareholding ministers.
The email pointed to the "unique challenges and circumstances" facing New Zealand at this time and alerted chairs to the Prime Minister's lunchtime announcement that day that Cabinet Ministers and public sector chief executives would be taking a 20 per cent pay reduction over the next six months.
Treasury's email said Ministers had asked officials to contact them in their roles as chairs of state-owned or partially state-owned companies to be sure they were aware of the approach being taking by the public service executive. The email also drew the chairs' attention to the steps taken by listed companies who have been affected by Covid-19.
"Ministers have asked us to find out what actions you might be considering to exercise restraint in the next financial year … particularly with regard to executive remuneration and board fees.
The email went on to say Treasury would be compiling information for shareholding ministers and would appreciate a response to the companies' relationship manager by close of play on Friday 17th of April. "We appreciate your continued assistance in keeping stakeholders appraised of such decisions at this time."
There is only one way to read such an email.
While it stops short of being a straight-out Government direction, the Treasury email falls well within behaviour which might charitably be described as "artful pressure".
First, the 48 hour deadline gave chairs and their boards less than two working days to respond.
Second, when it comes to listed energy companies like Mercury, Meridian Energy and Genesis Energy in which the Government retains 51 per cent stakes, this is highly inappropriate.
Chairs and their boards will by now be well down the track of assessing the impact of Covid-19 on their businesses.
Much is yet unknown. But one thing is sure they will be burning up the hours.
They will want to weigh their decisions against peer companies as they set remuneration levels for executives (basic pay/short-term incentives/long-term incentives) and fold them into their plans and budgets for the next financial year which begins on July 1.
Preparing budgets and strategic forecasts of the impact of Covid-19 on their businesses is not a linear job.
In this Covid-19 environment directors have to assess and ensure the ability of their own workforces to operate safely and healthfully for a lengthy time. A time in which revenues will also come under customer pressure due to economic recessions.
The listed companies which have already cut directors' fees and executive pay - such as Fletcher Building, SkyCity Entertainment and NZME to name just three - are under significant financial pressure. Their boards are leading from the top as they reshape entire workforces by standing down operations, cutting pay packets and staff levels to stay afloat.
Dame Therese Walsh who chairs the troubled Air New Zealand – which is also partially listed company in the Crown's commercial arsenal, has like the rest of her board taken a 15 per cent fee cut to the end of 2020 calendar year. Air NZ CEO Greg Foran and his executive team has similarly reduced salaries and performance incentives.
Air New Zealand's financial plight is different to the listed energy companies.
The Government may be the major shareholder. But it is over-reaching.
In effect, Treasury's email puts these chairs: Mark Verbiest (Meridian Energy), Barbara Chapman (Genesis Energy) and Prue Flacks (Mercury) in an invidious position.
At the very least this not so subtle nudge should have been thoughtfully discussed with Ministers. Not via email And certainly against a 48 hour deadline.
This is the third instance where the Finance Minister (albeit via the Treasury) has reached down into the governance of SOES and Crown companies.
The Herald revealed in March, that Robertson had written to almost all Crown-owned companies directing them to step up their game when it comes to revealing how much their top brass gets paid. Chairs of most State-Owned Enterprises were asked to get on "at least" the same level as NZX-listed companies when it came to disclosing chief executives' pay rates (this included TVNZ, and RNZ).
Last year, Robertson wrote to the chairs of some of the biggest Crown-owned companies asking their boards to forgo fee rises. A memo from Treasury officials, released under the Official Information Act (OIA), outlined that SOEs needed to do a better job of disclosing directors' pay.
In the current case, the only sensible response for any self-respecting chair would be to push back.