Fat pay packets still in the private sector - survey

The $5 million plus pay packet of Telecom's chief executive Paul Reynolds raised eyebrows, especially coming in a year when the company's profits were falling. Photo / Glenn Jeffrey.

Engineering bosses are among the best paid in the country but public sector bosses aren't the fat cats of public perception, says a survey of chief executive's pay.

Remuneration consultants Strategic Pay has released its July 2009 Chief Executive Officer and Top Executive remuneration survey, which contains data on more than 2000 executives.

The company said it dispelled some myths about the taxpayer funded public sector.

In the largest organisations, those in the private sector could expect an average package of $1 million plus.

However, chief executives in the largest public sector organisations could expect an average of $404,000.

The difference dwindled as organisation size decreased.

Chief executives in sub-$15 million public sector organisations earned virtually the same $166,000 fixed pay as their private sector counterparts.

It was a similar story for other executives, with the overall private sector clearly outpaying the overall public sector.

However, among senior finance sector executives, the difference is particularly striking, with those in the private sector averaging $196,400 fixed pay, while their public sector counterparts earn $149,800.

The number of large infrastructure projects in New Zealand was reflected in median total earnings of more than $300,000 for senior engineering executives in the largest companies, well above any of their peers in other functions.

Strategic Pay chairman John McGill said a standout was the low level of variable pay received.

Across all 217 private sector chief executives surveyed, only 53 per cent received any bonus or incentive, with a median payment equal to 23 per cent of base salary (average 41 per cent of base).

"Targets for the CEO are typically set at least at the 50 per cent level, so these payment levels indicate incentives were well below those expected in a better year.

"Despite some bad publicity in the US and Europe, New Zealand private sector companies are increasingly recognising the value of well structured executive incentive packages," said McGill.

"Executives are most able to influence company outcomes and should have some of their pay at risk, with no payout unless warranted by company performance."

The survey came after publicity about Telecom chief executive Paul Reynolds' $5 million-plus and Air New Zealand's Rob Fyfe's $2.4m pay packets, despite the companies' falling profits.

Comment and debate was always important but recent commentary seems largely based on casual opinion, hastily compiled, with minimal understanding of this part of the labour market, McGill said.

The size of the companies made comparisons within the local market difficult and many companies were unique in New Zealand.

"Agreed, CEO pay is a long way from the average wage and we maintain it always will be," said McGill.

"For most of us, while remuneration packages in the millions will not be a reality; the management of billion dollar organisations is similarly unlikely."

- NZPA