Bruce Bisset: Market's inflated view of CEO

If the Ruataniwha scheme goes belly-up or costs ratepayers millions in subsidies, Andrew Newman still walks away with his "extra" entitlement, writes Bisset. Photo / APN

The furore over regional council investment company chief Andrew Newman's pay rise illumines a major flaw in current employment practice, namely that seemingly all top-echelon jobs are now remunerated by perception, not actual quantifiable worth. And perception is easily manipulated.

If "the market" says a person in charge of a project or company of X size should receive Y dollars, that's what they're paid. Regardless of performance or results, or the underlying health of the organisation they are running.

Which leads to some ludicrous outcomes, as witnessed recently in the banking sector, where executives on obscene salary and incentive packages have walked away from multi-billion-dollar collapses with millions in bonus payments in their pockets.

In effect, they were paid to fail. And having failed, exited smiling with no personal accountability or liability attached. And "the market" deems that perfectly acceptable, no matter how many small investors might be ruined by said executive's gold-plated mismanagement.

Sure, obviously there has to be some common measure to judge how to set rewards for achievement at executive level, and the argument of like-for-like prevails because it appears compelling.

But too often it ignores fundamental differences in both the scope and expectations of the job, and the robustness or otherwise of the company, and merely sets an equivalent figure because that is the perceived "going rate" for jobs of that nature.

Who establishes those "going rates"? Why, the people already in those jobs! They drive up the rates by manipulating the perceptions of boards and shareholders as to their worth, in an ever-increasing spiral of greed based not on results but on pure self-interest.

And the boards and shareholders agree because the "keeping up with the Joneses" factor kicks in: they can't be seen to value their executives less, so err on the side of the ridiculous by over-valuing them instead. Despite the significant hole that might punch in their bottom-line.

Ordinary workers and contractors have no such mechanism available to them. They are constrained every which way to do their job within rigid specifications and to exacting standards, normally without incentive and with only a termination notice likely as the result of daring to ask for more.

And with unionism all-but dead, the guys on the factory floor have no hope of expectation that the company might one day realise their real worth and start rewarding them even a tenth as well as it rewards the "movers and shakers" buzzing about in the rarefied air above them.

Certainly they know the price they will be paid for failure.

All of which might - with apologies to the productive workers of the world - be well and good in the private sector, but in Mr Newman's case we are talking about a public employee.

A civil servant. Someone engaged not by a rampant engine of capitalism, but by ordinary ratepayers, through their election of local councillors, who then engage the council CEO to work on the public's behalf.

But having subsequently shuffled said CEO into a job he wasn't originally engaged to do, should those councillors then accede to the demands of a non-elected quasi-private body to pay him more for it, purely on commercial "like for like" as determined by the market?

A bonus for success I could stomach, but in parallel with the banking scandals if the Ruataniwha scheme goes belly-up or costs ratepayers millions in subsidies, Mr Newman still walks away with his "extra" entitlement.

Still, in this private-public partnership new age it's nice to know our servants are market valued, isn't it.

That's the right of it.

Bruce Bisset is a freelance writer and poet.