The latest Herald executive pay survey reveals the highest-paid chief executive took home $8.42m last year.
New Zealand’s top chief executives are being paid more than ever, although the recession has put the brakes on average pay rises. The country’s highest-paid CEO has set a new record for remuneration, a Herald survey reveals.
Average pay increases for the country’s most powerful chief executives have levelled off amid the recession but a new record has been set for the highest-paid NZX-listed company boss.
Chief executive remuneration packages increased by an average of 3.58 per cent in the 2023 financial year, according to the Business Herald’s Executive Pay Survey which covers 52 companies listed on the stock exchange.
The increase was much less than the nearly 15 per cent recorded for 2022 when CEOs cashed in on a rising sharemarket that pushed performance pay linked to share prices higher.
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The latest survey reflects a stagnant local sharemarket in 2023 with the S&P/NZX-50 index declining 0.66 per cent last year, a poor performance relative to other markets such as the S&P 500 index, which climbed 24.23 per cent.
The average chief executive pay for the top-listed companies still climbed to $2.288 million, up from $2.209m in 2022, with a record 25 CEOs receiving at least $2m in 2023.
Interestingly, the increase was less than the 7.1 per cent growth for the average wage and salary earner in the year to June 2023.
However, chief executive pay has shown a much more significant increase across the board over the past 10 years with a 40 per cent lift from the $1.645m average recorded in 2013.
“Certainly in terms of incentive pay, market performance would have had a big impact last year,” said Oliver Mander, chief executive of the New Zealand Shareholders Association, noting there still were some hefty pay packets. “We saw some interesting examples last year of CEO or executive remuneration structures that were heavily influenced by overseas structures.”
The top spot was retained by Ebos chief executive John Cullity, who recorded the largest remuneration package in the history of the Herald’s survey.
Cullity received total remuneration of A$7.76m ($8.42m based on the exchange rate at balance date) in the year to June 30, 2023.
This figure eclipses the previous record, held by former Fonterra chief executive Theo Spierings who took home $8.32m in 2017, and Cullity’s $6.64m in 2022.
Cullity, who has been at the helm of Ebos since 2018, earned a base salary of A$1.6m, short-term incentive (STI) of A$2.55m, long-term incentive (LTI) of A$1.57m and a special acquisition-related STI of A$2.04m.
Ebos reports in Australian dollars, given that the group generates about 80 per cent of its earnings in Australia.
Until last year, the company achieved impressive shareholder returns of 9.17 per cent, 47.69 per cent and 22.36 per cent in the 2022, 2021 and 2020 calendar years, according to NZX data.
However, in 2023 shareholder return was negative 16.85 per cent as the share price fell after the company confirmed its five-year contract with Chemist Warehouse in Australia would not be renewed from June this year. It was also recently knocked back in an attempt to buy Australian pet care company Greencross for A$4 billion.
A2 Milk’s David Bortolussi was the second highest-paid chief executive last year, receiving $5.83m in the year to June 30.
The company has provided much-improved disclosure, offering greater clarity to investors around executive pay. For the first time, a2 disclosed statutory remuneration, which highlights what was awarded to Bortolussi during the year, as well as what was actually paid out.
This means we can now see more clearly what the CEO stands to make should he meet performance targets.
Fonterra chief executive Miles Hurrell came in third with his $4.6m on the back of a stellar lift in the co-operative’s 2023 financial performance. Hurrell’s fixed remuneration increased by $125,800 on the previous year, while the benefits portion of his salary rose $8720 to $134,202 and his performance pay increased by $164,800 to $2.1m.
Ross Taylor, who departed as CEO of Fletcher Building last month, was again in the top five, taking home $3.7m last year, although the figure was down 44 per cent on the $6.59m he received in 2022.
Fletcher announced Taylor’s departure in February when the company revealed another significant impairment charge in its half-year results with a $122m write-down on its Australian business Tradelink.
Taylor ended up not serving out his six-month notice period, leaving on March 25 with Nick Traber appointed acting chief executive.
Others in the top 10 include F&P Healthcare’s Lewis Gradon ($3.67m), ASB’s Vittoria Shortt ($3.56m) and Mainfreight’s Don Braid ($3.53m).
The Shareholders’ Association has made executive remuneration a big focus lately as part of its advocacy for retail investors.
The organisation participated in the development of a new NZX remuneration reporting template as a voluntary component of listing rules. This was released to the market in December last year.
NZSA’s Oliver Mander said it was about time New Zealand companies were required to disclose executive remuneration more in line with other jurisdictions.
Commenting on the Herald’s survey, Mander said there has been some good improvement on disclosure, particularly with moves by more companies to reveal statutory remuneration which more clearly outlines performance-based rewards.
“On the face of it, disclosure is getting better and the structures used to incentivise CEOs are becoming more tightly tied to either shareholder outcomes or key corporate milestones. It will be very interesting to see if this improves further with the new CEO remuneration template.
“We would expect to see more consistent and clear disclosures around incentives on the back of the new CEO remuneration template presented to the market.
“So, while it might be too late for this year, certainly getting into next year’s reporting cycle we would expect to see an improved level of disclosure and one that will hopefully be clearer to investors and mean they can do proper comparisons across different organisations.
“The biggest problem we have is there is a real conflation between the remuneration that was paid and the rem that was awarded. And that can be tough to unpick, particularly given the variable levels of disclosure that we have seen in the past.
“What the template is designed to do is standardise that and provide some clear tramlines for companies to follow and we think that will be a really good thing for the market to enable better comparisons and quite frankly a more mature conversation around it.”
Referring to the highest-paid CEOs in this survey, Mander said some of the bigger pay packets partly reflected overseas pressures and trends.
“For a company like Ebos, which is mainly based in Australia, that reflects a clear link to Australian-based salaries and incentive structures.”
He said performance pay could be influenced by the vesting of longer-term incentives awarded some time ago – as in the case of Cullity – or the delivery of good short-term milestones – Vince Hawksworth at Mercury, for example.
“But there are also some anomalies that reflect differing pay structures. For example, Skellerup’s David Mair received an LTI and an STI – but the LTI is issued every two years, with a short vesting period occurring the following financial year. So, a large change year on year reflects him not having vested shares last year (in line with the company’s usual practice), but having shares vest this year.”
ASB New Zealand chief executive Vittoria Shortt retains her spot as the highest-paid female CEO, with statutory remuneration of $3.56m. ANZ’s Antonia Watson received $2.69m and Westpac’s Catherine McGrath got $2.05m.
To compare bank chief executive pay, the survey uses statutory remuneration, rather than take-home pay to keep them consistent and comparable to how remuneration is reported in Australia.
Among the few other women on the list were Spark’s Jolie Hodson ($3.13m), Auckland International Airport’s Carrie Hurihanganui ($1.92m), Sky TV’s Sophie Moloney ($1.15m) and former Channel Infrastructure chief executive Naomi James ($1.18m).
There are seven women covered in the survey; six are current chief executives, one fewer than the previous year.
Mander noted the overall ratio remains extremely poor.
While most chief executives experienced a pay rise, a handful saw their remuneration decline from the previous year for various reasons.
As mentioned above, Taylor had a 44 per cent decline – largely due to a bigger increase in his incentive payment the previous year.
The Warehouse chief Nick Grayston (down 22 per cent), Briscoe managing director Rod Duke (down 16 per cent) and Hodson (down 13 per cent) were notable in this category,
On the flipside, there were some huge increases last year.
Some reflected incentive payments with performance shares vested from previous year awards.
Outgoing Skellerup CEO David Mair saw his remuneration increase 177 per cent to $3.29m due to a $2.3m incentive payout.
Mair, who has an interest in five million Skellerup shares and one million options, recently announced his retirement having led the company for 14 years.
During that time Skellerup has quadrupled earnings and grown its market value to close to $1b. Air New Zealand chief executive Greg Foran is also on the rise with his $3.13m pay packet up 34 per cent on the previous year.
Fletcher Building, Spark and Ryman are potentially all on the radar.