KEY POINTS:
Fat cat executives - some earning more than 100 times the average wage - should be sharing their wealth with their workers, says a top Kiwi commentator. Corporate liaison for the New Zealand Shareholders Association and businessman Des Hunt said good bosses spread the benefits of an organisation
rather than lining their own pockets.
"What they are being paid should have some relevance to what others in the organisation are being paid," he said. "If the average wage at a medium-to-large company is $40,000, I would have difficulty if the CEO's base salary was much more than 30 to 40 times that. Anyone who thinks otherwise is being greedy."
A survey last year of 504 chief executives by human resources consultancy Sheffield found salary packages ranged from $183,327 to $365,000. Their average base salary rose by 5.9 per cent on the previous year.
A Business Herald investigation into 56 of New Zealand's biggest companies showed their bosses were even better off, with pay rises averaging 8 per cent and the average wage more than $1 million.
The rest of us got an average 4.2 per cent increase, bringing our salary up to around $45,000.
That's 111 times less than new Telecom boss Paul Reynolds, whose gold-plated package includes a base salary of $1.7m topped by $1.7m in incentives and another $1.7m in shares.
Hunt, a former director of a leading agricultural technology company, said pressure to reward New Zealand CEOs with internationally comparable packages was misguided. "Money is put up rather than incentives to achieve, and often remuneration has no relevance to long-term performance," he said.
"It should have, and bonuses should flow through so all members of a company have a reason to perform. Certainly have a base salary of $1.5m, but have some long-term options that would allow a good CEO to double his money in, say, five years.
"In New Zealand, $3 million is not bad money. I'm sure there are a lot of good executives who would be quite happy to live here on that," he said.
The Sheffield survey revealed that performance-related pay made up only about 14 per cent of the total packages of those who received it, compared with about 62 per cent in the United States.
Otago University academic Helen Roberts' thesis looked at links between CEO pay and performance. She said overseas investors were increasingly intolerant of top executives' getting big rewards at odds with performance, then leaving, but there was no similar trend here.
"There are a number of people who have it written into their contracts that they can walk away with a nice bundle of cash, then they are only there for a shortperiod of time," said Roberts.
"It's highly questionable that they write these deals before they even take office, then they walk away and there's very little song and dance." Regulations surrounding disclosure and transparency were other issues New Zealand shareholders had only recently started to question, she said.
Businesses here are required only to provide data on the numbers of individuals paid more than $100,000 annually.
Unite general secretary Matt McCarten was scathing of what he saw as an ever-increasing gap between CEOs' pay and that of their staff. "The catch-cry is always that we have to compete with overseas, and that's a nonsense. It's a myth that, because we are gullible, we buy into," he said.
"New Zealanders suffer from an inferiority complex. We have this idea that if we pay someone 10 times what they are worth then they must be 10 times better, so what we have is our CEOs being extraordinarily overpaid.
"It's led to a whole caste of technocrats who are doing extremely well, and it's not necessarily linked to performance."
"And it's the workers who are paying for it. It's all about profit, and if you can't expand the market, you just cut costs, which means workers. I've seen numerous negotiations where companies will budget a 2 per cent increase for their staff, something like 8 per cent for their senior management and for their top bods anything up to 100 per cent."
In Australia, publicly listed companies are required to disclose remuneration details for each of a company's five highest-paid executives, and there are moves towards having that raised to the 10 highest-paid.
Sheffield's Jarrod Moyle said the low level of salary disclosure in New Zealand had made executive pay a "big mystery". Companies did not know what the industry norm was and how they stood against competitors.
